Market Overview

Aetna and Other Stocks to Ride Out a Correction

With the markets running at record highs, analysts on the institutional portfolio strategy team at Oppenheimer are on the lookout for stocks that are likely hold their ground even if the markets should see a correction.

Stocks that have made the list include Aetna (NYSE: AET), Lam Research (NASDAQ: LRCX), Owens Corning (NYSE: OC) and Republic Services (NYSE: RSG). We take a glance at how these four stocks have fared and what analysts expect below.

Also note that some other Oppenheimer institutional portfolio picks include Chipotle Mexican Grill (NYSE: CMG), Norfolk Southern (NYSE: NSC) and Walgreen (NYSE: WAG).

Aetna

This diversified health care benefits company just boosted its 2013 forecast, even as its acquisition of Coventry Health Care (NYSE: CVH) proceeds. Hartford, Connecticut-based Aetna sports a market capitalization of more than $19 billion, and it offers a quarterly dividend yield of about 1.4 percent.

The price-to-earnings (P/E) ratio is lower than the industry average, and the long-term earnings per share (EPS) growth forecast is more than 10 percent. Aetna's operating margin is better than the industry average, and the return on equity is more than 15 percent.

Of the 19 analysts surveyed by Thomson/First Call who follow this stock, 11 recommend buying shares. The mean price target, or where analysts expect the share price to go, indicates about six percent potential upside. That target would be a new multiyear high.

Shares of Aetna are up more than 27 percent year-to-date and trading near a 52-week high. The stock has outperformed competitors Cigna (NYSE: CI) and United Healthcare (NYSE: UNH) over the past six months.

Lam Research

This Fremont, California-based semiconductor processing equipment maker reported better-than-expected fiscal quarter EPS last week and announced further share repurchases. Lam Research offers no dividend, and its market cap is more than $7 billion.

The long-term EPS growth forecast is about 11 percent, but the P/E ratio is greater than the industry average. The operating margin is better than the industry average, and the short interest is more than five percent of the total float.

Twelve of the 20 analysts surveyed recommend buying shares, though one rates the stock at Underperform. The mean price target represents more than nine percent potential upside relative to the current share price. The shares have not been in that neck of the woods since March 2011.

Shares are trading more than 14 higher than they were at the beginning of the year and recently hit a 52-week high. Over the past six months, this stock has outperformed the broader markets but underperformed competitor Applied Materials (NASDAQ: AMAT).

Owens Corning

The world's largest manufacturer of fiberglass reported better-than-expected first-quarter EPS, though revenue was in line with consensus estimates. Toledo, Ohio-based Owens Corning has a market cap of a little more than $5 billion, but it does not offer a dividend.

The forward earnings multiple of this building materials company is less than the industry average P/E ratio. The long-term EPS growth forecast is about 32 percent. But the return on equity is less than two percent. And the number of shares sold short represents more than six percent of the float.

Ten of the 16 analysts polled recommend buying shares, with six of them rating the stock at Strong Buy. The analysts believe Owens Corning has some head room, as their price target is about 10 higher than the current share price. That target would be a new multiyear high.

Shares have risen more than 12 percent in the past month, finally recovering from a sell-off in February. The stock's performance has been in line with specialty chemicals company PPG Industries (NYSE: PPG) over the past six months, but it has outperformed the broader markets.

Republic Services

This Phoenix-based waste management company also posted first-quarter EPS that topped estimates, though revenue matched analysts' expectations. The company has a more than $12 billion market cap, as well as a dividend near 2.7 percent.

The P/E ratio is a little higher than the industry average, and the long-term EPS growth forecast is less than six percent. But the operating margin is much better than the industry average. The short interest is less than two percent of the company's float.

Half of the 10 surveyed analysts recommend buying shares, though none recommend selling. Their mean price target is only marginally higher than the current share price, meaning the consensus is there is little upside at this time. However, that target would be a new multiyear high.

The share price is more than 16 percent higher year-to-date and trading near a 52-week high. Over the past six months, Republic Services has outperformed larger competitor Waste Management (NYSE: WM) but outperformed the broader markets.

Posted-In: Aetna applied materials Chipotle Mexican Grill CIGNA Coventry Health CareLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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