Editor's Pick: Originally Published Monday, Dec. 21

Which stocks have compelling investment ideas for 2016? Jefferies, a global investment banking firm owned by Leucadia National, updated its "Franchise Picks List," to include 17 U.S.-based stocks.

The list, first introduced in December 2013, highlights the firm's "highest conviction Buy-rated U.S. stocks."

In its latest update, Jefferies analysts added Manitowoc Co. (MTW - Get Report) to the list, while VeriFone and Western Digital were deleted. Earlier this month the analysts had added Gulfport Energy (GPOR - Get Report) and Stericycle (SRCL - Get Report) .

"The list has had some big winners, it's had its share of losers, too, and the net is that on average, individual stocks have modestly outperformed the S&P since inception," according to Monday's note to clients.

The last time Jefferies updated the list -- in June -- Alphabet (GOOG - Get Report) (GOOGL - Get Report) was the biggest underperformer of the group, while Mallinckrodt (MNK - Get Report) was the best performer of the year.

"Alphabet is now outperforming the S&P by 41% since its addition to the list, and MNK is modestly underperforming the index. ATVI, which is currently on the list, is the biggest outperformer in the list's brief history, outperforming by 114%," the note said.

The current list is skewed more toward value than growth, the note said, "but the list remains focused on compelling single name stories rather than following a style preference."

"Still, we'd remind investors that value has often outperformed growth following Fed rate hikes, perhaps partly because rate hikes presume a strong economy, and that could be helpful to the list in '16," the note said.

The stocks picks have been paired with TheStreet Ratings, TheStreet's proprietary ratings tool, to give an added perspective. TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

The list represents stocks in eight different sectors with a median market cap of $13 billion. Here's the list, with snippets of the analysts' investment theses. When you're done check out the large-cap stocks to sell before 2016.

ABBV Chart ABBV data by YCharts

1. AbbVie (ABBV - Get Report)
Industry: Health Care/Biotechnology
2015 return: -14.8%

Jefferies Price Target: $85
Jefferies Said: Abbvie is [analyst Jeff Holford's] top global pick and he believes the market overestimates the risk around potential Humira biosimilars. Jeff has high confidence that US biosimilar launches will be delayed at least until 2019. In the meantime, strong cash flow will fund further accretive M&A and the mid to late stage pipeline looks increasingly de-risked and set to deliver. In 2016, Jeff expects at least one new drug approval (venetoclax for CLL), one major label expansion (imbruvica for treatment naïve CLL) and several potential new filings (Elagolix, Duvelisib, pan genotypic HCV, Imruvica [FL, MCL, DLBCL]).

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate ABBVIE INC as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ABBV's revenue growth has slightly outpaced the industry average of 13.4%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Biotechnology industry. The net income increased by 144.9% when compared to the same quarter one year prior, rising from $506.00 million to $1,239.00 million.
  • Net operating cash flow has increased to $2,155.00 million or 20.66% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.05%.
  • The gross profit margin for ABBVIE INC is currently very high, coming in at 85.04%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ABBV's net profit margin of 20.84% significantly trails the industry average.
  • ABBVIE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ABBVIE INC reported lower earnings of $1.09 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($4.28 versus $1.09).
  • You can view the full analysis from the report here: ABBV

ATVI Chart ATVI data by YCharts

2. Activision Blizzard (ATVI - Get Report)
Industry: Technology/Home Entertainment Software
2015 return: 27.6%

Jefferies Price Target: $45
Jefferies Said: The transition to digital games continues to expand the company's margins and new consoles are selling faster than previous cycles .. We are two years into an eight year console cycle. Additionally, Activision is the best positioned name in eSports (competitive video gaming), in our view, with five of the top fifteen most popular games on Twitch. The large audiences watching Blizzard's games directly translates into more game sales and the recent hire of Steve Bornstein (former CEO of ESPN and NFL Network) should lead to more media deals. [The analysts] are also positive on the King acquisition and see potential for cross-selling on the mobile platform.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate ACTIVISION BLIZZARD INC as a Buy with a ratings score of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 16.7%. Since the same quarter one year prior, revenues rose by 31.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 666.66% and other important driving factors, this stock has surged by 97.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ATVI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ACTIVISION BLIZZARD INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ACTIVISION BLIZZARD INC increased its bottom line by earning $1.14 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($1.36 versus $1.14).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 652.2% when compared to the same quarter one year prior, rising from -$23.00 million to $127.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, ACTIVISION BLIZZARD INC's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ATVI

 

ALLY Chart ALLY data by YCharts

3. Ally Financial (ALLY - Get Report)
Industry: Financial Services/Consumer Finance
2015 return: -22.1%

Jefferies Price Target: $28
Jefferies Said: ALLY's stock at current levels discounts a weakening credit environment and doesn't fully account for what we expect to be imminent capital return. Ally received approval from the Federal Reserve to redeem the remaining 1.3M shares of its Series G preferred shares - enabling the company to implement a dividend and share repurchase program for 2016. ... Recent weakness related to volatility in the funding markets seems overdone given the progress toward more deposit funding.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate ALLY FINANCIAL INC as a Sell with a ratings score of D-. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Consumer Finance industry average. The net income has significantly decreased by 36.6% when compared to the same quarter one year ago, falling from $423.00 million to $268.00 million.
  • The debt-to-equity ratio is very high at 4.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Consumer Finance industry and the overall market, ALLY FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ALLY has underperformed the S&P 500 Index, declining 16.84% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • ALLY FINANCIAL INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ALLY FINANCIAL INC turned its bottom line around by earning $84.79 versus -$457.00 in the prior year. For the next year, the market is expecting a contraction of 97.6% in earnings ($2.02 versus $84.79).
  • You can view the full analysis from the report here: ALLY

 

T Chart T data by YCharts

4. AT&T (T - Get Report)
Industry: Telecom/Integrated Telecommunication Services
2015 return: flat

Jefferies Price Target: $40
Jefferies Said: The acquisition of DirecTV adds portfolio diversification, cash flow and significant opportunity for AT&T. Management was enthused by the early progress in the integration and remains committed to deliver $2.5bn or more of synergies. In our view, the acquisition provides a strong path to a rich portfolio of in-home and mobile entertainment. AT&T stock offers more than a 5.6% dividend yield.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate AT&T INC as a Buy with a ratings score of B-. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $10,797.00 million or 23.76% when compared to the same quarter last year. In addition, AT&T INC has also modestly surpassed the industry average cash flow growth rate of 16.26%.
  • The gross profit margin for AT&T INC is rather high; currently it is at 55.43%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.65% trails the industry average.
  • AT&T INC's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.23 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.71 versus $1.23).
  • After a year of stock price fluctuations, the net result is that T's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: T

 

BA Chart BA data by YCharts

5. Boeing (BA - Get Report)
Industry: Industrials/Aerospace & Defense
2015 return: 7.4%

Jefferies Price Target: $185
Jefferies Said: IATA air traffic growth is about 7% YTD, well in excess of global GDP growth. The global airline industry is likely to see record profits in 2015 and we believe these factors help to support Boeing's already years-long backlog. We also note that Boeing has been intently focused on productivity through the use of systems and robotics, which should continue to drive margins and cash flow. We expect 4% share shrink in 4Q15 relative to 4Q14 and note the 3% dividend yield. The company raised the dividend by 20% in mid-December, after raising it by 25% in late '14.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate BOEING CO as a Buy with a ratings score of B+. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BA's revenue growth has slightly outpaced the industry average of 1.8%. Since the same quarter one year prior, revenues slightly increased by 8.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • BOEING CO has improved earnings per share by 32.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.24 versus $7.40).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 25.1% when compared to the same quarter one year prior, rising from $1,362.00 million to $1,704.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: BA

 

COH Chart COH data by YCharts

6. Coach (COH)
Industry: Consumer Goods & Services/Apparel, Accessories & Luxury Goods
2015 return: -14.8%

Jefferies Price Target: $50
Jefferies Said: [Analyst Randy Konik] is bullish on Coach based on positive sales trends, remodeled stores and improving product reception thanks partly to Stuart Vevers, who was appointed creative director in the middle of 2013 and whose product is now available across Coach's lines. After 2+ years of negative SSS comps, Randy expects North American comps to turn positive by the June Q of 2016. The handbag category has lost spending share across discretionary, but Randy believes that newly popular designs, such as bucket bags and mini backpacks, will help to reignite the category. Randy expects North American Coach store remodels to contribute ~$0.20-$0.50 in EPS over the next 3-5 years.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate COACH INC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that COH's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.03 is high and demonstrates strong liquidity.
  • The gross profit margin for COACH INC is currently very high, coming in at 72.97%. Regardless of COH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.35% trails the industry average.
  • Net operating cash flow has significantly decreased to $8.00 million or 94.24% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Textiles, Apparel & Luxury Goods industry average. The net income has decreased by 19.1% when compared to the same quarter one year ago, dropping from $119.10 million to $96.40 million.
  • You can view the full analysis from the report here: COH

 


GOOG Chart GOOG data by YCharts

7. Alphabet (GOOG - Get Report) (GOOGL - Get Report)
Industry: Technology/Internet Software & Services
2015 return: 40.4%

Jefferies Price Target: $900
Jefferies Said: [Analysts] Brian Pitz and Brian Fitzgerald's bullish Alphabet view has a lot to do with their positive stance on YouTube, as they believe online video is the biggest online ad growth driver and YouTube is the premier vehicle to play that trend. In fact, the recent acceleration in paid click growth is notable because it suggests YouTube is now large enough to move the needle as TV ad budgets begin to shift online in earnest. Their YouTube model estimates 50% Y/Y Net Revenue Growth in 2014 and 25% Y/Y in 2015.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate ALPHABET INC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Internet Software & Services industry average. The net income increased by 45.3% when compared to the same quarter one year prior, rising from $2,739.00 million to $3,979.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 13.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ALPHABET INC has improved earnings per share by 35.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALPHABET INC reported lower earnings of $25.08 versus $39.38 in the prior year. This year, the market expects an improvement in earnings ($58.00 versus $25.08).
  • Net operating cash flow has remained constant at $6,007.00 million with no significant change when compared to the same quarter last year. This quarter, ALPHABET INC's cash flow growth rate has remained relatively unchanged and is slightly below the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, ALPHABET INC's return on equity exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: GOOG

 


GPOR Chart GPOR data by YCharts

8. Gulfport Energy (GPOR - Get Report)
Industry: Energy/Oil & Gas Exploration & Production
2015 return: -48.5%

Jefferies Price Target: $36
Jefferies Said: Gulfport's recent underperformance on a lower growth outlook is overdone. The company trades at a similar multiple to peers yet grows faster and maintains a healthier balance sheet. Management indicated 2016 growth is set to be strong as 100 MMcf/d of curtailed gas comes back online with 15 gross (10 net) Utica wells. [Analyst Dan Braziller] models 20+% growth in 2017 on a ~600 MM budget and estimates the stock trades at 10.6x 2016 and 9.1x 2017 EBITDA, at strip; the peer average is over 10 x in 2016 and 2017. Finally, we remain bullish on natural gas and note that US production peaked in the spring of '15, associated gas production should continue to contract, and LNG projects in early '16, and ramping in '17, should help bolster demand.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate GULFPORT ENERGY CORP as a Sell with a ratings score of D+. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 5709.9% when compared to the same quarter one year ago, falling from $6.92 million to -$388.21 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GULFPORT ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 48.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 4587.50% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • GULFPORT ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GULFPORT ENERGY CORP increased its bottom line by earning $2.88 versus $1.99 in the prior year. For the next year, the market is expecting a contraction of 108.2% in earnings (-$0.24 versus $2.88).
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: GPOR


IR Chart IR data by YCharts

9. Ingersoll-Rand (IR - Get Report)
Industry: Industrials/Industrial Machinery
2015 return: -17%

Jefferies Price Target: $65
Jefferies Said: IR remains [analyst Steve Volkmann's] top pick as HVAC related end markets continue to present one of the few industrial growth opportunities into 2016 as commercial construction markets steadily improve. Margins in Climate are expected to expand on positive price/mix as well as a tailwind from lower material costs. Thermo King is setting up to surprise to the upside versus Street expectations as the relative exposure to the NA Class 8 market is less than a third of the total mix.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate INGERSOLL-RAND PLC as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 21.8%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • INGERSOLL-RAND PLC has improved earnings per share by 6.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, INGERSOLL-RAND PLC increased its bottom line by earning $3.29 versus $2.08 in the prior year. This year, the market expects an improvement in earnings ($3.73 versus $3.29).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 3.3% when compared to the same quarter one year prior, going from $291.30 million to $300.90 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that IR's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for INGERSOLL-RAND PLC is currently lower than what is desirable, coming in at 34.30%. Regardless of IR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, IR's net profit margin of 8.62% compares favorably to the industry average.
  • You can view the full analysis from the report here: IR
MNK Chart MNK data by YCharts

10. Mallinckrodt (MNK - Get Report)
Industry: Health Care/Pharmaceuticals
2015 return: -28.1%

Jefferies Price Target: $85
Jefferies Said: Despite recent controversy surrounding pricing and distribution structures for Acthar gel, 4Q15 results showed a 10% Y/Y increase in Acthar revenue. We also have a positive outlook on other Specialty brands such as Ofirmev and gConcerta, which currently contribute ~$1b in sales. Currently, Acthar contributes over $1b in revenue annually on its own, with over a 57% contribution margin. We see the Acthar asset serving as an anchor as the company focuses on expanding its autoimmune/rare disease franchise through M&A.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate MALLINCKRODT PLC as a Sell with a ratings score of D+. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio of 1.22 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, MNK maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
  • MNK has underperformed the S&P 500 Index, declining 22.93% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Pharmaceuticals industry and the overall market, MALLINCKRODT PLC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for MALLINCKRODT PLC is rather high; currently it is at 55.20%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MNK's net profit margin of 8.52% is significantly lower than the industry average.
  • Net operating cash flow has significantly increased by 64.24% to $337.20 million when compared to the same quarter last year. In addition, MALLINCKRODT PLC has also vastly surpassed the industry average cash flow growth rate of -0.35%.
  • You can view the full analysis from the report here: MNK

MTW Chart MTW data by YCharts

11. Manitowoc Co. (MTW - Get Report)
Industry: Industrials/Construction & Farm Machinery & Heavy Trucks
2015 return: -28.1%

Jefferies Price Target: $21
Jefferies Said: We are adding MTW to our Franchise Pick list in conjunction with this report. [Analyst Steve Volkmann] believes the markets are valuing the company's crane business at effectively zero. He thinks the spinoff of the foodservice business is worth roughly $15/share based on an EV/ EBITDA approach, which implies essentially no value for the crane business. At 5x average cycle EBITDA, the crane business is worth $1b, or over $7 per MTW share, and looking at EV/Sales, we come up with about $6/share, as even deeply cyclical companies tend to trade between 50-100% of EV/Sales.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate MANITOWOC CO as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 21.8%. Since the same quarter one year prior, revenues fell by 12.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MANITOWOC CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, MANITOWOC CO's EPS of $1.13 remained unchanged from the prior years' EPS of $1.13. For the next year, the market is expecting a contraction of 58.0% in earnings ($0.48 versus $1.13).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 93.4% when compared to the same quarter one year ago, falling from $73.10 million to $4.80 million.
  • The gross profit margin for MANITOWOC CO is currently lower than what is desirable, coming in at 25.84%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.55% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $6.30 million or 89.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: MTW

 

OC Chart OC data by YCharts

12. Owens Corning (OC - Get Report)
Industry: Industrials/Building Products
2015 return: 28.5%

Jefferies Price Target: $56
Jefferies Said: The company is benefitting from positive tailwinds both in asphalt costs (down 30% Y/Y) and from strength in roofing volumes/stable pricing. Despite some choppiness reported in commercial roofing, OC is somewhat sheltered by high exposure to residential (85% of revenue) vs. commercial (15% of revenue). Additionally, though capex is expected to be 120% of D&A in 2016 due to the mineral wool investment, [analyst Phil Ng] anticipates it dropping below D&A in 2017 and 2018. This, in combination with the $2b NOL and WC improvement, should drive strong FCF over the next few years. Our F16 EPS estimates are modestly ahead of the Street, but we believe there's upside to our estimates.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate OWENS CORNING as a Buy with a ratings score of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and attractive valuation levels. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 115.90% and other important driving factors, this stock has surged by 38.69% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • OWENS CORNING reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, OWENS CORNING increased its bottom line by earning $1.91 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($2.35 versus $1.91).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Building Products industry. The net income increased by 115.4% when compared to the same quarter one year prior, rising from $52.00 million to $112.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • You can view the full analysis from the report here: OC

 

PFE Chart PFE data by YCharts

13. Pfizer (PFE - Get Report)
Industry: Health Care/Pharmaceuticals
2015 return: 2.7%

Jefferies Price Target: $48
Jefferies Said: [Analyst Jeff Holford] expects Ibrance to act as a short term driver for the stock, but the Allergan acquisition may act as an overhang until it becomes clear that the acquisition will close without additional consequences. Additionally, Jeff expects separation of GEP no later than the end of 2019. While the acquisition of Allergan is clearly a high risk and expensive transaction (~8.6x 2016E sales; ~22.4x 2016E earnings), it gives important strategic long-term benefits and flexibility, while driving decent EPS accretion mid-term (we estimate 0% in '17, 5% in '18, 13% in '19 and 16% in '20). We also expect PFE to continue to act as an acquirer in the US biopharmaceutical sector.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate PFIZER INC as a Buy with a ratings score of B. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $5,024.00 million or 12.57% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.35%.
  • The gross profit margin for PFIZER INC is currently very high, coming in at 84.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PFE's net profit margin of 17.61% significantly trails the industry average.
  • After a year of stock price fluctuations, the net result is that PFE's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: PFE

 

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14. PayPal (PYPL - Get Report)
Industry: Technology/Payments
2015 return (from July 20): -13.1%

Jefferies Price Target: $44
Jefferies Said: [Analyst Jason Kupferberg] likes PYPL due to its scarcity value, as it combines robust top-line growth, solid and improving profitability, a strong global brand, secular tailwinds, and attractive cash flow and balance sheet characteristics. The secular tailwinds stemming from the migration from cash to electronic payments and faster growth in online payments vs. in-store should be positives. PYPL announced on the latest earnings call they are starting a pilot this quarter to enable PYPL merchants with a "Pay with Venmo" button. By the end of 2016, all Venmo users are expected to have the capability to buy from any of PYPL's ~10M merchants. Jason believes PYPL could see 2017 revenue/EPS accretion of 0.8%-2.5% and 1.4%-4.2%, respectively.

TheStreet Said: not rating yet

 

SRCL Chart SRCL data by YCharts

15. Stericycle (SRCL - Get Report)
Industry: Industrials/Environmental & Facilities Services
2015 return: -10.9%

Jefferies Price Target: $146
Jefferies Said: Shares are down 20% since 3Q earnings, on what we think are largely transitory issues. Weak demand from clients indirectly tied to energy markets, for example, is negatively affecting the hazardous waste business, but the company has conservatively removed all of this from guidance. SRCL has focused growth investments outside its core medical waste business, adding in hazardous waste collection starting in 2008/09 and Shred-It in 2015. Both of these businesses offer additional route-based waste management growth opportunities and potential margin upside as existing infrastructures are leveraged (using the same trucks and transfer facilities in many cases).

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate STERICYCLE INC as a Hold with a ratings score of C+. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 7.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, SRCL has a quick ratio of 2.24, which demonstrates the ability of the company to cover short-term liquidity needs.
  • STERICYCLE INC's earnings per share declined by 38.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STERICYCLE INC increased its bottom line by earning $3.78 versus $3.56 in the prior year. This year, the market expects an improvement in earnings ($4.38 versus $3.78).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Commercial Services & Supplies industry average. The net income has significantly decreased by 36.9% when compared to the same quarter one year ago, falling from $82.85 million to $52.26 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Commercial Services & Supplies industry and the overall market, STERICYCLE INC's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: SRCL
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16. WestRock (WRK - Get Report)

Industry: Materials/Paper Packaging
2015 return (from July 1): -29.3%

Jefferies Price Target: $68
Jefferies Said: WRK is well positioned to take advantage of stabilizing containerboard pricing. As the containerboard supply/demand overhang has been lifted (assisted by WRK idling plants to take supply out of the market) investors can refocus on the $1b+ cost takeout opportunity over the next 3 years. The company is also committed to aggressive stock buybacks and Phil expects WRK to generate 8.9% FCF yield in 2016.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate WESTROCK CO as a Buy with a ratings score of B. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 48.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • WESTROCK CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WESTROCK CO reported lower earnings of $3.19 versus $3.29 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $3.19).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.38%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 58.49% compared to the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Containers & Packaging industry average. The net income has decreased by 24.8% when compared to the same quarter one year ago, dropping from $153.90 million to $115.80 million.
  • You can view the full analysis from the report here: WRK

 

WETF Chart WETF data by YCharts

17. WisdomTree (WETF - Get Report)
Industry: Financial Services/Asset Management & Custody Banks
2015 return: 0.5%

Jefferies Price Target: $24
Jefferies Said: WETF will capitalize on the popularity of its currency hedged products (e.g., HEDJ and DXJ) to expand its distribution footprint in the US and grow its business internationally. More near-term, product demand has been exacerbated by a strengthening USD and should further benefit from rising US interest rates driving flows into interest rate hedged products. With a growing brand and ongoing favorable secular and regulatory trends, we expect new product introductions at an increasing pace and industry leading AUM and margin growth. With a strong B/S and significant FCF, we also expect a shareholder friendly capital return policy primarily executed through buybacks and special dividends.

TheStreet Said: Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate WISDOMTREE INVESTMENTS INC as a Buy with a ratings score of B. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WETF's very impressive revenue growth greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues leaped by 71.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WISDOMTREE INVESTMENTS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WISDOMTREE INVESTMENTS INC increased its bottom line by earning $0.45 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.58 versus $0.45).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 119.2% when compared to the same quarter one year prior, rising from $10.62 million to $23.29 million.
  • 49.48% is the gross profit margin for WISDOMTREE INVESTMENTS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.83% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 85.97% to $44.62 million when compared to the same quarter last year. Despite an increase in cash flow of 85.97%, WISDOMTREE INVESTMENTS INC is still growing at a significantly lower rate than the industry average of 264.01%.
  • You can view the full analysis from the report here: WETF