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Wall Street Takes Notice of These 4 Stocks - Should You?

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Wall Street’s top investors are keeping an eye on two separate congressional testimonies from Fed Chair Jerome Powell and U.S. Trade Representative Robert Lighthizer on U.S.-China trade negotiations amid a volatile geopolitical backdrop. While Britain’s March deadline to exit the European Union looms large, tensions between India and Pakistan have erupted.

With the market in a capricious state, smart investors are sorting the most valuable stocks. Microsoft Corporation (MSFT - Free Report) , Kodiak Sciences Inc. (KOD - Free Report) , General Motors Company (GM - Free Report) and The Procter & Gamble Company (PG - Free Report) are currently on their radar and should be on yours as well.

Microsoft On a Tear

Tech giant Microsoft Corporation’s initiatives to become a more cloud-centric company and its shift from software licensing to a subscription model for its ever-present Office software has worked in favor of the company. The software giant has more than doubled its share price in the past three years and has surpassed the broader S&P 500 in the said period. The software giant has also been the Dow Jones’ third best stock last year and Wall Street remains bullish on the company’s prospects.

Along with Amazon.com, Inc. (AMZN - Free Report) , Microsoft has solidified its position as a leader in the cloud services domain. The company’s commercial-cloud products primarily include Azure, Office 365 commercial and Dynamics 365. Lest we forget, Azure is not only the biggest contributor to the company’s commercial-cloud revenues but is also growing at a mind blowing rate.

In fact, majority of analysts believe that this category will have a positive impact on the company’s earnings narrative in the near term. Growth in the cloud computing segment is also expected to surpass both the personal computing and business process segments in the days to come.

Microsoft, by the way, has made a number of high profile cloud computing deals, including a massive seven-year contract with Walgreens Boots Alliance, Inc. (WBA - Free Report) . These deals should boost profit margin and revenues.

At the same time, Microsoft’s product suit is well supplemented by a solid position in the content space, thanks to its online services, Xbox gaming platform and video-game development studios, to name a few.

The Zacks Rank #3 (Hold) company’s expected earnings growth rate for the current and next quarter are a steady 5.3% and 4.4%, respectively. Actually, the stock’s projected earnings growth rate for the current year is 13.7%, more than the Computer - Software industry’s expected gain of 11.3%.

Kodiak Sciences — A Solid Development Stage Biotech Stock

Hedge fund managers Felix and Julian Baker are known to pick developmental-stage biotech stocks. After all, the Baker brothers have built the most valuable healthcare oriented funds — “Baker Bros. Advisors.”

So, when this reputed team buys a significant stake in a company, investors should take notice. Advisors recently bought a 25% stake in clinical-stage biotech Kodiak Sciences Inc. Notably, Kodiak is on course to develop an early-stage treatment for macular degeneration, better known as KSI-301, whose market is valued at more than $5 billion. Such a huge market, thus, gives Kodiak ample scope to grow.

Kodiak currently has a Zacks Rank #3. The company’s expected earnings growth for the next year is 8.7%, slightly higher than the Medical - Biomedical and Genetics industry’s projected gain of 7.1%.

General Motors — An Undervalued Auto Giant

General Motors is a good value stock, especially, after the car manufacturer emerged from bankruptcy almost a decade ago. The stock is recently trading at a P/E ratio of around 6, has delivered a commendable performance in its recently-reported quarter and expects to grow for the rest of this year.

The company is also well placed in the autonomous vehicle space. General Motors acquired Cruise for nearly $1 billion. Softbank and Honda also invested in General Motors-acquired Cruise and the valuation surged to $14.6 billion.

Cruise has given General Motors a worthwhile commercial autonomous taxi option for the near future. Self-driving technologies like Super Cruise in General Motors’ Cadillac category has proven to be a grand success (read more: Autonomous Driving Set to Rev Up: 4 Stocks to Gain).

General Motors, by the by, gives a dividend yield of 3.9%, and it’s no surprise that some of the Wall Street’s top minds have taken notice. Needless to say, Warren Buffett’s Berkshire Hathaway Inc. (BRK.B - Free Report) has not only bought a stake in General Motors in 2012 but has also increased its holding in the third quarter of 2018.

General Motors currently has a Zacks Rank #2 (Buy). The company’s earnings growth rate over the past five years have been 15.5%, higher than the Automotive - Domestic industry’s gain of 8.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old is Gold

After several years of giving The Procter & Gamble Company a thumb down, Wall Street is finally warming up to the stock. The consumer product bigwig that sells staples like diapers and razors saw its shares climb 18.5% in the last six months, against the broader S&P 500’s decline of 3.6%.

P&G, in its most recent quarter, registered the best growth in years with organic sales rising 4%. The jump in organic sales helped P&G steal a significant market share from rival Kimberly-Clark Corporation (KMB - Free Report) .

P&G is also likely to convince its customers to pay a little more for its brands like Pampers, Tide, and Gillette and that in turn should boost its profit margins. P&G currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 5.7%, higher than the Soap and Cleaning Materials industry's projected gain of 0.1%.


Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

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