Matt McCall, of Penn Financial Group, highlights five top stock picks from his 23-page 2016 Stock Market Outlook.
Five stocks from Matt McCall’s annual stock market outlook.
Alibaba Group Holding Limited (BABA)—One of the most talked about IPOs of 2014 has fallen off the radar of most retail investors after it took a beating throughout most of 2015. The stock has now fallen to a level that has it looking like an attractive avenue to play a China rebound. The bad news has been baked into the cake in China and the upside greatly outweighs the downside. With BABA you are gaining exposure to a behemoth in the tech industry.
BP plc (BP)—The mega-cap oil & gas company based in the UK has been struggling for years and is now near a level that works fundamentally. Then there is the dividend yield of 8.0%. Even if the stock goes sideways for the next 12 months, it will provide 8% in income as long as the dividend remains intact, which we feel is highly likely. If the price of oil starts to rebound in 2016, BP should be a big winner.
Mohawk Industries (MHK)—The world’s largest flooring manufacturer and the second largest producer of carpets and rugs has been in the midst of a long-term uptrend for years. The stock trades at a conservative 15 times 2016 earnings estimates and has big upside through both organic growth and acquisitions. The company will benefit from the continued housing recovery as well as home improvements. Lower oil will also boost the bottom line in the near-term as the commodity is a large expense for the company.
Vulcan Materials (VMC)—Within the materials sector, Vulcan is one of our favorite individual stocks. From a technical analysis basis, the chart has been a methodical series of higher highs and higher lows. From a fundamental view, the stock is a high growth play with earnings expected to increase over 115% in 2015 and up another 66% in 2016. The company sells construction aggregates, asphalt mix, and ready-mix concrete mainly in the US. The continued resurgence of the housing market, and as the economy continues to improve, Vulcan will be a direct winner.
Ryanair Holdings Plc ADR (RYAAY)—The Irish budget airline has not only been able to outperform their competitors, but the entire global stock market. The company trades at a higher P/E ratio than its US peers, however, the growth is there to support them. Based on this fiscal year earnings per share estimates, the stock trades with a P/E ratio of 16.4 and with bottom line growth above 20% annually the next two years the PEG ratio is well below 1.0. With oil near a 7-year low and the outlook for the commodity to remain depressed for the majority of 2016, the earnings estimates may be low for the company with even more upside potential.
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Matt McCall, Founder and President, Penn Financial Group
