by Sam Collins | March 26, 2013 10:59 am
The market’s technical picture is still solidly bullish. However, after the dynamic run that started late last year, near-term momentum is slowing and a minor consolidation is likely. Since Dec. 31, the S&P 500 has ground out a gain of about 9%, and a pause to consolidate could provide for bargains, especially in the more volatile small-cap and midcap areas. Support for the S&P 500 is at 1,531, and a close under that line would cause some concern. But with the Dow industrials making another new high in late March, it seems unlikely that a major reversal is in the wind.
This month’s list of stocks to buy is populated with names that have continued the upward momentum and should break to new highs following the current consolidation. Four of the six are in the health care sector, which has maintained its upward momentum in spite of increased taxes, lawsuits and a variety of potential negatives. Stocks that forge ahead despite walls of worry generally continue to provide above-average returns.
One stock that has caused a lot of trauma to investors, Apple (NASDAQ:AAPL), may have finally hit a low. It doesn’t fit the criteria of other stocks on our list, but at the current price and with the current technical outlook, it is just too juicy to ignore.
Here are your top stocks to buy for April:
Despite a decline of almost 40% from its September 2012 high, Apple (NASDAQ:AAPL) is still one of the most successful technology companies on the planet. Its very substantial cash position and growth well above its peers make it a compelling value at current prices.
Analysts project continued growth for iPhones and iPads through 2015. Fundamental analysts have a mean 12-month target of over $600 for Apple.
Technically, the stock has broken above both its bearish resistance line and 50-day moving average, and so has finally broken from a six-month decline. Long-term investors should buy and hold Apple, and traders could see a quick pop to the trading gap between $505 and $556.
Actavis (NYSE:ACT), a producer of generic and branded drugs, is the result of an acquisition of the Actavis Group by Watson Pharmaceuticals, which adopted its name. The combined company beat analysts’ earnings estimates for Q4 by 4%. This year, a full integration of the two companies is expected to bring in earnings of $7.70 to $8.10 per share.
The stock has been consolidating in a bullish rectangle since November, which followed a six-month bull channel that resulted in a gain of almost 30%. In late March, ACT popped above the rectangle’s resistance at $90 on a steady increase in volume. Buy ACT for a trade to $100.
Pharmaceutical services company AmerisourceBergen Corp. (NYSE:ABC) provides drug distribution primarily in the United States and Canada. Because of its ability to profitably manage through the recent economic downturn and its “focus on generic and oncology drugs which are among the fastest growing and most profitable revenue drivers,” according to S&P, this stock could command a higher-than-average price-to-earnings (P/E) ratio.
Recently, ABC reached a $400 billion, 10-year distribution contract with Walgreen Co. (NYSE:WAG) and Alliance Boots. As a result, Goldman Sachs (NYSE:GS) and other analysts raised their earnings and price targets for the stock.
On that news, the stock gapped through the resistance line of a well-defined bull channel on heavy volume. Since continuation gaps often close, traders should consider a buy under price of $49 for ABC with a trading target of $54. But holding this stock as a long-term investment could yield significantly better results.
Global health care company Baxter International (NYSE:BAX) is a leader in the development and manufacturing of products that address immune disorders, infectious diseases, kidney disease, trauma, and other chronic and life-threatening medical conditions. Earnings and revenues have been growing at a steady pace, and the average consensus estimate for 2014 earnings is $5.22, up from an estimate of $4.66 in 2013, and earnings of $4.53 in 2012. The current dividend yield is 2.5%.
The stock is trading in a well-defined bull channel following a break from a consolidation pattern in November. It is under heavy accumulation supported by a MACD buy signal last week. A break above the resistance line of the current channel at about $71.50 could add another $5 to the stock, giving it a trading target of $76-$77. Baxter’s history of regular earnings and revenue increases makes it suitable for long-term investment portfolios.
Pfizer (NYSE:PFE) is the world’s largest pharmaceutical company, producing a wide range of drugs. In October 2009, it acquired Wyeth. The blue-chip has had a long history of earnings gains and dividend increases. The current dividend yield is 3.4%.
Technically, PFE has been in a bull market since January 2012. On March 20, following a meeting with Pfizer management, JPMorgan Chase (NYSE:JPM) analysts raised their price target to $32, and S&P forecasted an earnings target of $2.30 for 2013, up from $2.19 in 2012. And a stock repurchase plan could result in even higher earnings.
PFE’s momentum has recently increased, driving it through the top of a well-defined two-year bull channel. Pfizer appears attractive as a long-term, blue-chip diversification in an investment-grade portfolio.
Qualcomm (NASDAQ:QCOM) is a leader in developing products and services based on its advanced wireless broadband technology. It recently reported fiscal first-quarter earnings of $1.26, which beat analysts’ consensus estimate of $1.13. For fiscal year (FY) 2013, ending in September, the consensus estimate has been raised to $4.51 versus $3.71 in FY 2012. And expectations have been raised for FY 2014 to $4.86. As a result, many analysts have also raised their price objectives, which now stand at a median of $76.50, although S&P increased its target to $84.
Since Jan. 2, the stock has regularly tested the top of its bull channel with three continuation gaps, the last after announcing that it was raising its dividend by 45% to $0.35 a share. It currently yields 3.4%. It also added a new $5 billion stock buyback program to replace a previous $4 billion plan.
Traders can look forward to a break above last March’s high of $68.87 to $78-$80. Longer-term investors could expect much higher prices, even a break to the January 2000 high at $100, since this company is on an earnings tear that could exceed analysts’ estimates in every quarter in FY 2013 and 2014.
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