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4 Core Principles for Strategic Investing

Key Points

  • Analysts’ sentiment helped to lower these share prices, but the moves are overblown. 
  • These stocks have double-digit upsides at the analysts’ lowest price target. 
  • Opportunistic investors are already scooping up shares; the deals may not last long. 
  • 5 stocks we like better than Tower Semiconductor

Value is where you find it. Today, you can find it with Tower Semiconductor Ltd. NASDAQ: TSEMJohnson Controls International PLC NYSE: JCIBarnes Group Inc. NYSE: B and Howard Hughes Holdings Inc. NYSE: HHH

These companies trade at a significant discount to the analysts’ target range and come with a healthy outlook for capital return. The last of these stocks faces a minimum double-digit upside relative to the analysts’ lowest price target, with a 30% to 50% gain in store for most at the consensus. 

Tower Semiconductor wins with Intel

Tower Semiconductor achieved success when it couldn’t reach an agreement to merge with Intel. The failure resulted in a substantial termination fee paid by Intel and, unexpectedly, a new and more beneficial deal for shareholders. Instead of being absorbed into Intel’s substantial operations, Tower Semiconductor remains an independent operator and will become one of Intel’s foundry clients. This is a win-win situation as they can leverage each other’s strengths and grow their businesses.

Tower analysts rate the stock as a consensus “buy” with an average near $36.50 and a range of $35 to $38. The $35 low price target represents a roughly 25% increase from the current price, which is being driven higher by the market buzz. The partnership with Intel should accelerate revenue earnings growth by as early as 2025 through advancing technologies. Tower Semiconductor specializes in analog semiconductors used in signal processing, which are essential for applications such as the IoT, autonomous driving and AI.

Johnson Controls International is a deeply undervalued asset

Johnson Controls International’s stock price is being impacted by slowing yet expected growth, which is precisely the kind of growth that risk-averse investors should appreciate, especially when it’s trading 10% below the analyst’s lowest stock price target and at a value of only 15x earnings.

The substantial value has pushed the dividend yield to near 2.85%, which is another attractive feature, and there are expectations for distribution growth. While the company has only increased the payout over the past 12 years but not annually, there is sufficient room in the cash flow to do so.

Johnson Controls could produce a better-than-expected report in early December. Results in Q2 were slightly below expectations, with mixed data trends, leading analysts to lower estimates. However, analysts still anticipate mid-to-high-single-digit revenue growth and solid margins, which should support the market at these prices.

The stock has already corrected 30% from recent highs, factoring in the assumed weakness, and it’s currently at a critical support level where a rebound could quickly materialize.

Insiders buy the dip in Barnes Group

Barnes Group shares experienced a decline after a weaker-than-expected quarter with 15% top-line growth and unexpected margin pressure. The unforeseen results caused about a 40% decrease in the stock price, but it appears that the lowest point has been reached. 

Five insiders made six transactions, with the CEO making two purchases, increasing the combined holdings to 5.2%. Institutions are also showing interest in this stock, owning about 86% of it. Barnes Group’s dividend is reasonably secure, with a consistent regular payment history and a conservative payout ratio. The stock yields about 2.45%, with shares close to $26.50. 

Howard Hughes Holdings activist continues to acquire shares

Howard Hughes’ activist investor, Bill Ackman, and Pershing Square Capital Management are continuing to buy shares. The firm’s holdings have surpassed 35% with recent purchases and have positioned the company to maintain control of the board, if not gain controlling interest in HHH. Regardless, Howard Hughes Holding is on track with its plans to unlock value for shareholders.

The company has completed its restructuring and intends to spin off non-core assets in early 2024, allowing it to focus on its high-end commercial and residential real estate portfolio, which generates the majority of the profits.

Before you consider Tower Semiconductor, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified five stocks that top analysts are quietly recommending to buy now before the broader market catches on… and Tower Semiconductor wasn’t on the list.

While Tower Semiconductor currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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