Using conventional economic thinking, an investor should move some of their money from stocks to bonds as interest rates rise because they are less risky, and the rate of return is better. So as U.S. Treasury rates hit 3%, I’m sure there are some conventional thinkers out there that will start to sell their stocks and move into bonds.
Just because it’s conventional thinking doesn’t mean you should follow it, though, because there are several companies out there that yield more than 3% and provide both the stability of a reliable dividend and the upside of owning a stock. We asked three of our contributing investors to each highlight a stock they see as a great investment yielding more than a 10-year Treasury bond today. Here’s why they picked the following stocks.
Top 5 Warren Buffett Stocks To Buy Right Now: Encana Corporation(ECA)
Encana Corp (USA) (NYSE:ECA) is already reaping the benefit of higher oil prices. This leading U.S. energy producer just announced a quarterly profit beat due to a broad rise in global prices. “Consistent with our plan, we expect significant high-margin oil and condensate growth in the second half of 2018,” Encana CEO Doug Suttles revealed in a statement.
The company boasts a strong portfolio of diverse resource plays producing natural gas as well as oil. On the oil front, Encana owns assets in the Permian Basin, Eagle Ford, Duverney and Montney resources. Over its five-year plan, the company recently ramped up its guidance for oil production of ~600 MBoe/d by 2022, easily beating Street expectations.
“We like Encana because it has exposure to the most economic resource plays in North America; its best-in-class production and cash flow growth; its focus on achieving improved economics through application of technology balanced by its relative valuation to Permian/Montney names” cheers five-star Canaccord Genuity analyst Dennis Fong. He has a $14.50 price target on the stock — indicating 8% upside potential from current levels.
However the average analyst price target works out at a more bullish $15.17 (13% upside potential). Plus we can see that in the last year, Encana has received 100% Street support. This means non-stop buy ratings (with 6 in the last three months alone).
Top 5 Warren Buffett Stocks To Buy Right Now: Merck & Company, Inc.(MRK)
Finally, Merck is the lowest-yielding stock of this group of three, yet even it manages to post a 3.2% yield from its dividend. The drugmaker has several well-known medications that produce a ton of cash flow. And even though the many clinical trials in its pipeline are expensive, Merck has enough capital to reinvest in its business and still leave plenty behind for dividend payments. Merck hasn’t been as reliable as its peers in dividend growth, but for seven straight years now, shareholders have seen rising payouts on an annual basis.
Merck has seen a lot of changes recently in where it gets revenue from its core pharma business. Blockbuster treatments like Januvia and Janumet for diabetes have faced pressure on the pricing front, while cardiovascular drugs Vytorin and Zetia have had to deal with greater competition from generics. Yet Merck has seen some other drugs step up to provide the growth to offset sales declines elsewhere. For example, cancer-fighter Keytruda has been a promising high-growth drug, and Merck hopes to get Food and Drug Administration approval for its use in a wider range of illnesses.
The drugmaker has also made a big boost in research-and-development spending to build out its pipeline of future candidate treatments. All told, Merck isn’t shying away from the challenge of reinvesting in its own business, and similar strategies have worked out well in the past.
Top 5 Warren Buffett Stocks To Buy Right Now: Twitter, Inc.(TWTR)
Twitter Inc (TWTR) is getting hit by criticism from the Israeli government on security concerns.
This is all in the context of overcrowded investor positioning in the sector, with hedge funds and retail traders equally guilty, resulting in massive inflows into the group in recent weeks.
That raises the specter of a disorderly unwind as panicked selling leads to profit taking and a rush for the exits.
Here are four big-cap tech stocks to sell now. Click through the slideshow to see them.
Top 5 Warren Buffett Stocks To Buy Right Now: Mid-Con Energy Partners, LP(MCEP)
Tulsa-based Mid-Con Energy Partners LP(NASDAQ:MCEP) is an upstream oil and natural gas producer. As an exploration and production company, times are great when oil prices are high. However, in an environment of low prices, revenue generation becomes a struggle.
Fortunately for MCEP stock, crude oil now trades in the $70-per-barrel range, its highest price since 2014.
MCEP stock traded as high as $27 per share in 2013. The oil price slump of 2014-16 hit its interests hard. By 2016, MCEP had become a penny stock, trading as low as 73 cents per share at one point. The stock has struggled to gain traction since then, but now trades in the $1.75-per-share range.
However, company financials may have begun a turnaround. Revenue fell from $96.91 million in 2014 to $56.1 million by 2016. Although revenues rose to $58.93 million in 2017, analysts estimate revenues will remain below $60 million for both 2018 and 2019.
Whether those estimates factor in higher crude prices remains unclear. And at these levels, investors should still consider MCEP stock speculative. However, the stock remained consistently above $20 per share while oil traded above $100 per barrel. If oil can continue to climb higher, perhaps MCEP stock will return to 2013 levels and become one of the hot penny stocks.
Top 5 Warren Buffett Stocks To Buy Right Now: Urban Outfitters Inc.(URBN)
Urban Outfitters has seen its stock price skyrocket 120% over the last year and 20% during the last 12 weeks. The trendy fashion retailer’s quarterly revenues are projected to climb by nearly 10% to touch $837.08 million. Investors should also be excited to see that Urban Outfitters’ earnings are expected to hit $0.30 per share, which would mark a 130.7% surge from the prior-year quarter.
URBN is also currently a Zacks Rank #2 (Buy), with an Earnings ESP of 2.52%. URBN’s Most Accurate Estimate is also coming in 1 cent better than our current consensus estimate. This, of course, means that Urban Outfitters could top earnings estimates when it reports its Q1 financial results after market close on Tuesday, May 22.