​While the daily top analyst upgrades and downgrades rundown included many names, one analyst call that also stood out on Thursday came from Goldman Sachs. The firm’s Drew Borst has reinstated its coverage of Walt Disney Co. (NYSE: DIS) with a Buy rating on the heels of its $65 billion cash acquisition of Fox assets.

The $142 Goldman Sachs price target is more than 10% higher than the $127.50 consensus analyst target from Refinitiv, and it represents an implied upside of 26% from the $112.52 closing price ahead of the analyst call. Disney also has that 1.6% dividend yield for total return investors. Disney’s stock has been a significant underperformer in 2019, with the Dow Jones industrials and S&P 500 handily up by double-digits and Disney shares up less than 3% year-to-date.

The analyst’s key focus of the call is the recently completed Fox acquisition. The deal is being viewed as a positive long-term strategy for Disney and its direct-to-consumer pipeline.

The report said:

It is the dawn of a new era at Disney. The $70 billion acquisition of Fox is now closed and the approaching debut of Disney+ streaming service in late calendar year 2019 marks a momentous shift in the company’s content monetization model from third-party licensing to direct-to-consumer streaming.

Goldman Sachs also sees the Fox acquisition bringing economies of scale and stronger bargaining power with distributors. There is also content diversification with Fox’s adult programming and an increased international reach for broader distribution.

As far as cost synergies, that estimate is being put at about $2 billion by the second year’s completion. That is about 11% of expected pro forma operating income for 2019.

This upgrade is also after “Avengers: Endgame,” due to be released on April 26, has broken the record held by “Star Wars: The Force Awakens” in pre-sales. In fact, the movie pre-sales have been reported to have broken that record in six hours versus the full 24-hours for the Star Wars film.

Disney shares were trading up 1.3% at $114.03 early Thursday, in a 52-week range of $97.68 to $120.20.

Note that most Dow and S&P 500 stocks getting Buy and Outperform ratings come with an implied 8% to 10% total return to the price target at this stage of the bull market. This call on Disney is almost three times that, and it is after Disney leveraged up for the Fox acquisition.

This is not the only bullish post-merger analyst call on Disney, nor is it the most bullish of all analysts, despite being more than 10% higher than the consensus price target. Rosenblatt Securities started coverage on April 2 with a Buy rating and a $150 price target. That call noted that Disney is a more attractive way to invest into streaming media than Netflix ahead of its Disney+ streaming service. The firm expects Disney to have 15 million subscribers by 2021 and growing to a combined 190 million subscribers for all of its streaming services by 2023.

With the first quarter ending on Friday with a huge upsurge, it may make sense for investors to take a deep breath. With the market posting the best first quarter in almost 10 years, after a fourth quarter that delivered a gut-wrenching near 20% decline, the real question for most investors is where we go next. With first-quarter earnings reports right around the corner, and a host of issues stirring the political and geopolitical pot, is it time to take a step back or to get aggressive and look for a momentum move higher?

One sector that had a very solid showing during the first quarter was technology. The recent pullback may be giving investors a solid entry point on some of the top companies. We found four that were rated Buy at Merrill Lynch that bucked the recent pullback trend and look like they have some big momentum heading into the second quarter.

Arista Networks

The analysts see this company as an outstanding growth play for 2019. Arista Networks Inc. (NYSE: ANET) develops high-performance cloud networking solutions, including switches, an advanced software-defined networking (SDN) operating system and SDN applications. The company’s low-latency switches lower networking costs for high-frequency trading platforms, large internet companies and cloud service providers.

The company reported strong fourth-quarter revenues of $596 million and earnings of $2.25 per share, which beat the consensus forecast solidly. In addition, first-quarter guidance also beat Wall Street expectations.

While some of the company’s peers have reported cloud spending slowing, Arista is bucking the trend and expects strong cloud spending to continue in 2019. Mid-term to long-term growth drivers include campus switching, routing and 400-gig solutions.

The Merrill Lynch price target for the shares is $300, while the Wall Street consensus target is $298.54. The stock closed above both levels on Friday at $314.46 a share.

Broadcom

This stock has broken out to all-time highs. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.

Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.

Broadcom investors receive a 3.52%% dividend. Merrill Lynch has a $325 price target, and the consensus target is lower at $307.03. Shares closed Friday at $300.71 apiece.

CyberArk Software

This company’s less than $5 billion market cap may make it a prime takeover target. CyberArk Software Ltd. (NASDAQ: CYBR) claims to be the only security company focused on eliminating the most advanced cyber threats, those that use insider privileges to attack the heart of the enterprise.

The company proactively secures against cyber threats before attacks can escalate and do irreparable damage. It is estimated that at least 35% of the Fortune 100 and 17 of the world’s top 20 banks use the software to protect high-value information assets, infrastructure and applications.

CyberArk pioneered of a new layer of IT security solutions that protects companies from cyber attackers that have evaded the network perimeter. CyberArk solutions secure an organization’s critical assets, dubbed privileged accounts, which are the keys to databases, industrial control systems, servers and applications, all which house sensitive data. CyberArk software is focused on protecting these accounts, which are highly targeted in cyberattacks to disrupt networks or steal sensitive info.

The $116 Merrill Lynch price objective is less than the $120.63 consensus estimate. Shares closed at $119.05 on Friday.























































































ServiceNow

This stock had an incredible 2018 and remains a top Wall Street pick. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.

The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.

Federal government business is said to be tracking at or above quota for the first quarter, partners have reported rapid growth in their company practices and top Wall Street analysts have noted continued success in replacing Remedy and high-win rates in general.

Merrill Lynch has a price target of $235. The posted consensus target is $240.06, and shares have blown by both of those levels to close most recently at $246.49.I'm interested in the  Newsletter
   terms and conditions
 When technology stocks become momentum stocks and blow through price targets at major firms where they are rated Buy, you know they are strong. With incredible relative strength, and little if any upward resistance, these might be great trades for accounts seeking alpha. That said, priced to perfection, they need to deliver the goods, or they could face some sharp selling.

​With the first quarter ending on Friday with a huge upsurge, it may make sense for investors to take a deep breath. With the market posting the best first quarter in almost 10 years, after a fourth quarter that delivered a gut-wrenching near 20% decline, the real question for most investors is where we go next. With first-quarter earnings reports right around the corner, and a host of issues stirring the political and geopolitical pot, is it time to take a step back or to get aggressive and look for a momentum move higher?

One sector that had a very solid showing during the first quarter was technology. The recent pullback may be giving investors a solid entry point on some of the top companies. We found four that were rated Buy at Merrill Lynch that bucked the recent pullback trend and look like they have some big momentum heading into the second quarter.

Arista Networks

The analysts see this company as an outstanding growth play for 2019. Arista Networks Inc. (NYSE: ANET) develops high-performance cloud networking solutions, including switches, an advanced software-defined networking (SDN) operating system and SDN applications. The company’s low-latency switches lower networking costs for high-frequency trading platforms, large internet companies and cloud service providers.

The company reported strong fourth-quarter revenues of $596 million and earnings of $2.25 per share, which beat the consensus forecast solidly. In addition, first-quarter guidance also beat Wall Street expectations.

While some of the company’s peers have reported cloud spending slowing, Arista is bucking the trend and expects strong cloud spending to continue in 2019. Mid-term to long-term growth drivers include campus switching, routing and 400-gig solutions.

The Merrill Lynch price target for the shares is $300, while the Wall Street consensus target is $298.54. The stock closed above both levels on Friday at $314.46 a share.

Broadcom

This stock has broken out to all-time highs. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.

Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.

Broadcom investors receive a 3.52%% dividend. Merrill Lynch has a $325 price target, and the consensus target is lower at $307.03. Shares closed Friday at $300.71 apiece.

CyberArk Software

This company’s less than $5 billion market cap may make it a prime takeover target. CyberArk Software Ltd. (NASDAQ: CYBR) claims to be the only security company focused on eliminating the most advanced cyber threats, those that use insider privileges to attack the heart of the enterprise.

The company proactively secures against cyber threats before attacks can escalate and do irreparable damage. It is estimated that at least 35% of the Fortune 100 and 17 of the world’s top 20 banks use the software to protect high-value information assets, infrastructure and applications.

CyberArk pioneered of a new layer of IT security solutions that protects companies from cyber attackers that have evaded the network perimeter. CyberArk solutions secure an organization’s critical assets, dubbed privileged accounts, which are the keys to databases, industrial control systems, servers and applications, all which house sensitive data. CyberArk software is focused on protecting these accounts, which are highly targeted in cyberattacks to disrupt networks or steal sensitive info.

The $116 Merrill Lynch price objective is less than the $120.63 consensus estimate. Shares closed at $119.05 on Friday.

ALSO READ: Top Wall Street Analysts Have 5 Stocks Under $10 With Gigantic Upside Potential

ServiceNow

This stock had an incredible 2018 and remains a top Wall Street pick. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.

The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.

Federal government business is said to be tracking at or above quota for the first quarter, partners have reported rapid growth in their company practices and top Wall Street analysts have noted continued success in replacing Remedy and high-win rates in general.

Merrill Lynch has a price target of $235. The posted consensus target is $240.06, and shares have blown by both of those levels to close most recently at $246.49.I'm interested in the  Newsletter
   terms and conditions
 

When technology stocks become momentum stocks and blow through price targets at major firms where they are rated Buy, you know they are strong. With incredible relative strength, and little if any upward resistance, these might be great trades for accounts seeking alpha. That said, priced to perfection, they need to deliver the goods, or they could face some sharp selling.

​After a gargantuan effort, Intel managed to get its modem chips into some iPhone 7 units, and was the sole modem provider for last year’s iPhone XS, XS Plus, and XR.

The chip giant was to be the sole provider of the 5G modems in the 2020 iPhones, too, but it has been missing deadlines for the development of the chip, the XMM 8160 5G modem, a source with knowledge of the situation says.

In order to deliver big numbers of those modems in time for a September 2020 iPhone launch, Intel needs to deliver sample parts to Apple by early summer of this year, and then deliver a finished modem design in early 2020. Intel said in November that it expected to ship the 8160 5G modem in the second half of 2019. The company, responding to this story, pointed me to that same statement. “As we said in November 2018, Intel plans to support customer device launches in 2020 with its XMM 8160 5G multimode modem,” a company representative said in an email late Wednesday.

But Apple has lost confidence in Intel to deliver the chip, our source says…

Meanwhile Apple appears to be readying itself to design its own modem chips. The company now has a team of between 1000 and 1200 engineers working on the modem chips for future iPhones, our source says. Apple has recruited RF engineers from both Intel and Qualcomm to work in a new development facility in San Diego, our source says, and the development operation has been ramping up quickly. It is possible that future iPhone modem chips could be designed at that facility by Apple employees, and then fabricated by TSMC or Samsung. But that effort is likely about iPhones for 2021 and beyond.

BOEING DISASTER

MICRO CHIP

​Stocks were looking for a marginally higher open on Friday, along with a better-than-expected payrolls report from the U.S. Department of Labor. With U.S.-China trade talks reportedly entering their late stages, the major market indexes are still up double-digits year to date, and the S&P 500 is within striking distance of all-time highs again. Investors have to be considering how they want their portfolios positioned for the rest of the year and beyond.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. Our goal is to find new trading and investing ideas for our readers. Some of the daily analyst reports cover stocks to buy, while some cover stocks to sell or to avoid.

Additional commentary and trading data have been added on some of the daily analyst reports. The consensus analyst price targets and other valuation metrics are from the Refinitiv (Thomson Reuters) sell-side research service.

These are the top analyst upgrades, downgrades and initiations seen on Friday, April 5, 2019.

Amicus Therapeutics Inc. (NASDAQ: FOLD) was started as Buy with a $20 price target (versus a $13.91 prior close) at Janney. The firm noted that the company is building a comprehensive portfolio of novel therapies for rare diseases, with a focus on lysosomal storage disorder, and that in addition to Galafold for Fabry disease it has a Phase 3 clinical development for Pompe disease. The firm also sees limited downside risk with significant upside potential from the gene therapy pipeline.

Avrobio Inc. (NASDAQ: AVRO) was started as Buy with a $34 target price (versus a $24.42 close) at Janney. The firm noted that the company has built a strong lentiviral gene therapy platform for lysosomal storage disorders in which enzyme replacement therapy has been the standard of care but significant unmet medical needs remain.

Bed Bath & Beyond Inc. (NASDAQ: BBBY) was raised to Equal Weight from Underweight at Morgan Stanley. The firm has a $20 target price (versus a $17.59 close), and the report pointed to the activist intervention and pressure for a new entire board has brought a risk to the underlying negative thesis.

Boston Beer Co. Inc. (NYSE: SAM) was downgraded to Sell from Neutral at Goldman Sachs, with the firm pointing out the continued decelerating sales growth at the brewer of Sam Adams beer.

Celgene Corp. (NASDAQ: CELG) was downgraded to Neutral from Overweight at Cantor Fitzgerald.

Chipotle Mexican Grill Inc. (NYSE: CMG) was reiterated as Hold at Stifel, but the firm vaulted its price target to $700 from $500, noting that its turnaround and rekindled growth momentum has continued to gather steam. The stock closed at $703.38, and it had a consensus target price of $571.78.

Constellation Brands Inc. (NYSE: STZ) was downgraded to Hold from Buy at Deutsche Bank, after a 6.5% gain the prior day to $191.45 a share. The firm sees the risk/reward profile as now balanced with the current share price, representing the base case fundamentals.

Corbus Pharmaceuticals Holdings Inc. (NASDAQ: CRBP) was started with a Buy rating and assigned an $18 price target (versus a $7.08 close) at Jefferies. The shares were indicated up over 6% at $7.55 after the call, in a 52-week range of $4.50 to $9.11. The market cap was $455 million ahead of the call.​


​CSX Corp. (NYSE: CSX) was downgraded to Neutral from Buy at UBS, just two days after being downgraded to Neutral from Positive at Susquehanna. It closed down 0.5% at $74.80 on Thursday and had a prior consensus target price of $76.00.

Dow Inc. (NYSE:  DOW) was started as Underweight and given a $49 price target at JPMorgan. Shares closed up almost 5% at $59.71 on Thursday ahead of the call.

Federal National Mortgage Association (FNMA), or Fannie Mae, was started with a Neutral rating and assigned a $2.50 price target at B. Riley FBR. Shares closed at $2.90 and have a 52-week range of $0.98 to $3.18.

Gulfport Energy Corp. (NASDAQ: GPOR) was downgraded to Perform from Outperform at Oppenheimer.

Intel Corp. (NASDAQ: INTC) was downgraded to Market Perform from Outperform at Wells Fargo, but the firm did raise its target price to $60 from $55 in the call. The firm pointed out lower demand in 2019 and also more competition from the likes of AMD. Intel shares closed up 0.8% at $55.92 ahead of the call, with a consensus target price of $53.50.

International Paper Co. (NYSE: IP) was downgraded to Sector Perform from Outperform at RBC Capital Markets.

Lennar Corp. (NYSE: LEN) was already rated as Overweight at JPMorgan, but the firm added the stock to its Focus List as the firm sees earnings upside potential coming from multiple fronts.

Marsh & McLennan Companies Inc. (NYSE: MMC) was downgraded to Market Perform from Outperform at Wells Fargo, just a day after Credit Suisse screened it as an example of the type of company with the type of valuation that Warren Buffett would buy.

Merus N.V. (NASDAQ: MRUS) was maintained as Outperform but the price target was cut to $25 from $34 (versus a $13.55 close) at Wedbush Securities, with the firm calling the target lower after revising its expectations for its MCLA-128 in metastatic breast cancer.

ALSO READ: Why Goldman Sachs Is So Bullish on Disney After the Fox Acquisition

PotlatchDeltic Corp. (NYSE: PCH) was raised to Buy from Neutral with a $42 price objective (versus a $38.03 close) at Merrill Lynch.

Snap Inc. (NYSE: SNAP) was maintained as Neutral but the price objective was raised to $12 from $10 at Merrill Lynch. Shares closed up 1% at $11.28 ahead of the call and were indicated up 1.5% at $11.45 on Friday morning. The consensus target price was $8.85 on last look.

UGI Corp. (NYSE: UGI) was raised to Buy from Hold and the price target was raised to $60 from $54 at Jefferies. Shares closed up 0.4% at $52.50 ahead of the call, with a consensus target price of $58.60.

Viacom Inc. (NASDAQ: VIAB) was raised to Outperform from Sector Perform at RBC Capital Markets, with the firm noting that Viacom’s recent pact with DirecTV for carriage will pave (or repave) the way for merger talks with CBS.

WEX Inc. (NYSE: WEX) was started with a Neutral rating at Robert W. Baird.

Thursday’s top analyst calls included Carbon Black, Etsy, Facebook, KeyCorp, Micron Technology, Nio, Roku, Smart Sheet, Vail Resorts, Waste Management and many more.

​TECH SOCKS



The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting an increase of 18.6% in the group’s seasonally adjusted composite index for the week ending March 29. Mortgage interest rates decreased on four of five types of loans the MBA tracks.

On an unadjusted basis, the MBA’s composite index rose by 18% in the past week. The seasonally adjusted purchase index increased by 3% compared with the week ended March 15. The unadjusted purchase index rose by 4% for the week and was 10% higher year over year.

Mortgage loan rates for a top-tier 30-year fixed-rate loan dropped from 4.40% to 4.11% last week, according to Mortgage News Daily. As of Tuesday night, top-tier borrowers were paying 4.21% for that loan. The yield on a 10-year U.S. Treasury note tumbled last week from 2.59% to 2.47% as of last night’s close. A year ago, the 10-year note yielded 2.73%.

Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting said:

There was a tremendous surge in overall applications activity, as mortgage rates fell for the fourth week in a row – with rates for some loan types reaching their lowest levels since January 2018. Refinance borrowers with larger loan balances continue to benefit, as we saw another sizeable increase in the average refinance loan size to $438,900 – a new survey record. We had expected factors such as the ongoing strong job market and favorable demographics to help lift purchase activity this year, and the further decline in rates is providing another tailwind.

The MBA’s refinance index increased by 39% week over week, and the percentage of all new applications that were seeking refinancing increased from 40.4% to 47.4%.

Adjustable rate mortgage loans accounted for 9.5% of all applications, up 1.7 percentage point compared with the prior week.

According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage decreased from 4.45% to 4.36%. The rate for a jumbo 30-year fixed-rate mortgage slipped from 4.35% to 4.21%. The average interest rate for a 15-year fixed-rate mortgage dipped from 3.87% to 3.78%.

The contract interest rate for a 5/1 adjustable rate mortgage loan remained unchanged at 3.77%. Rates on a 30-year FHA-backed fixed-rate loan decreased from 4.48% to 4.41%.

Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

​MORTAGE RATES

​Boeing Co. (NYSE: BA) CEO Dennis Muilenburg on Thursday issued a statement accepting responsibility for the two 737 MAX 8 crashes that killed 346 people. His statement came after the Ethiopian government released a 33-page preliminary report on the Ethiopian Air crash on March 10 that killed 157 shortly after taking off from Addis Ababa. A crash in Indonesia in October killed 189 people on a Lion Air 737 MAX 8.

Muilenburg said, “[I]t’s apparent that in both flights the Maneuvering Characteristics Augmentation System, known as MCAS, activated in response to erroneous angle of attack information.” Then he said, “It’s [Boeing’s] responsibility to eliminate this risk. We own it and we know how to do it.”

As the Ethiopian government’s report made clear, the pilots of the fatal flight followed the aircraft flight manual’s specified procedure to recover from the MCAS automatic anti-stall actions. They shut off the automatic system and manually cranked the control wheel that should have pulled the plane’s nose up. When that did not happen, the pilots re-engaged the MCAS, but it was too late to recover and the plane hit the ground at a speed of between 458 and 500 knots (about 527 to 575 mph).

In his statement, Muilenburg promised that the software update that Boeing is working on “will eliminate the possibility of unintended MCAS activation and prevent an MCAS-related accident from ever happening again.” Whether that will be enough to reestablish confidence in the 737 MAX remains to be seen.

Another question that remains to be answered is how the aviation world will view the Federal Aviation Administration (FAA) once the final reports on the two crashes are in. The FAA has been criticized for being too willing to accept Boeing’s own safety recommendations rather than conducting the agency’s own testing.

At a Senate committee hearing on the crashes, the FAA’s Daniel Elwell defended the agency’s practice of letting aircraft makers like Boeing certify to the safety of the planes they build. Elwell said that the FAA would need 10,000 new employees and a budget increase of $1.8 billion annually to pay for the work now accomplished by the aircraft makers’ own employees.

Since the dawn of passenger transportation by air, the FAA has set the gold standard in aircraft safety. When the agency certified a plane as safe to fly, civil aviation authorities around the world accepted the FAA’s certification virtually without question. Since the Ethiopian Air 737 MAX crash, however, both European Union and Canadian regulators have said they will conduct their own certification programs before allowing the aircraft to fly again. Other national authorities could follow this example, lengthening the time it takes to get the 350 or so planes that are already in airlines’ fleets back flying and to deliver the planes that are stacking up in Boeing’s inventory.

That erosion of trust will hurt Boeing because the extra testing will take time and time is money to Boeing. As in cash flow. While the 737 MAX is grounded, the company cannot deliver the new planes that are rolling off its assembly line at the rate of nearly 50 a month, and until Boeing delivers the planes it doesn’t get paid.

Muilenburg said Thursday that Boeing is nearing completion of its software fix to the MCAS and “anticipate[s] its certification and implementation on the 737 MAX fleet worldwide in the weeks ahead.” At one time that may have been true, but now those weeks could stretch into months.

Boeing’s stock dropped by around 11% following the Ethiopian Air crash, or about $35 a share. As of Thursday’s close, the stock had recovered nearly $28 of that loss to close at $395.86, up nearly 3% for the day. In Friday’s premarket session, the shares traded down about 0.1% at $395.41. The stock’s 52-week range is $292.47 to $446.01. Boeing is scheduled to report first-quarter results on April 24.

ANALYST PICS

​RETIREMENT

DISNEY

​TECH GIANTS

​MARCH NEWSLETTER 9

​OIL STOCKS

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION                                                                                                         

Copyright ©​ Daniel Cullinane CPA.

​If any group of investors feels like they are tardy to the party, it’s those in the energy sector, and with good reason. While the price of West Texas Intermediate crude is up a stunning 46% from the lows posted in late December, stocks in the energy sector are lagging that huge move by a large margin. In fact, the Energy Select Sector SPDR (NYSEARCA: XLE) fund, which tracks the sector, is only up 16.5% since the lows, not even matching half the crude price move.

Given the huge disparity in the price levels, we screened the Merrill Lynch energy research database looking for stocks that had big upside potential to the firm’s posted target prices. We found five that look like outstanding plays going forward, and with the busy summer driving season right around the corner, now may be a great time to add shares.

Anadarko Petroleum

This top stock is still down a stunning 30% from highs printed in October, and it is also a solid liquefied natural gas (LNG) play. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs). The other segments are Midstream and Marketing.

Anadarko has the capacity to sustain planned stock buybacks at current levels, providing support to close a value gap that many on Wall Street see at 50%. Strong free cash flow, enabled by advantaged Brent leverage, has competitive free cash compared with traditional large-cap “yield” names, but with competitive growth potential. The company has made a transition toward compelling value with growth and yield.

Anadarko Petroleum shareholders are paid a 2.70% dividend. The Merrill Lynch price target for the stock is a stunning $80. The Wall Street consensus price objective is much lower at $66.89, and the shares closed trading on Wednesday at $44.47 apiece.

Concho Resources

Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street loved the deal. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties.

It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.

Concho Resources has reported strong earnings but still has a lot of upside to the posted price targets.

The company pays a small 0.45% dividend. Merrill Lynch has a price target of $155, and the posted consensus target is $157.18. The stock closed most recently at $108.87 per share.

Exxon Mobil

This remains a top Wall Street energy pick, and it has bounced back nicely from the December lows. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere


Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

For 75 years in a row, Exxon Mobil has raised its dividend. Thanks to its vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.

Exxon shareholders are paid a nifty 4.05% dividend. The $105 Merrill Lynch price objective is well above the $83.99 consensus target price. The stock closed at $80.90 on Wednesday.

Hess

This top mid/large cap pick is down 20% from highs printed last October and is on the Merrill Lynch US 1 list. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, NGLs and natural gas. It primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.

The Merrill analysts are extremely bullish on the shares as they see multiple catalysts for the company this year. A recent research piece noted this:

With an inflection in free cash flow in the Bakken from 2020 and first oil from Guyana, we expect a dividend raise next year, the first since 2013. Management suggests a long term dividend target of ~$450 million may be appropriate, leaving headroom for significant share buy backs. While the share price has led many sector peers in 2019, we believe investor patience is starting to pay off with substantial exploration option value remaining, perhaps best characterized by Hess CEO John Hess: “we know we’re sitting on a pot of gold.”

Shareholders of Hess are paid a 1.68% dividend. Merrill Lynch has set its price target at $82. The consensus target is $65.50, and the shares were last seen trading at $59.56 apiece.24/7 Wall St.
Stifel Stays Positive on Top Semiconductor Stocks: 3 to Buy Now

Valero Energy

This is a Wall Street and a Merrill Lynch favorite that may be a solid play for more conservative balanced accounts. Valero Energy Corp. (NYSE: VLO) is the largest independent petroleum refining and marketing company in the United States. It is based out of San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has total throughput capacity of around 2.5 million barrels per day.

Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Valero Energy investors are paid an outstanding 4.27% dividend. The Merrill Lynch price target is a massive $126, while the posted consensus target is a much lower $106.82. The stock closed on Wednesday at $84.26 a share..​

​Both traditional and Roth IRAs can be effective retirement savings tools, but eligibility limitations mean one or both may not be right for you. Here’s a guide to help you choose.

What’s the difference between a traditional and Roth IRA?

A traditional IRA is an individual retirement account that allows you to make contributions on a pre-tax basis (if your income is below a certain level) and pay no taxes until you withdraw the money.¹ This makes traditional IRAs an attractive option for investors who expect to be in a lower tax bracket during retirement than they are now.

On the other hand, Roth IRA contributions are made with after-tax dollars. The benefit of a Roth IRA is that you can withdraw your contributions and earnings tax-free after age 59½, if you’ve had the account for at least five years, or you meet certain other conditions.²  In addition, your after-tax contributions to the Roth account can be withdrawn at any time, tax and penalty-free (however, if you make an early withdrawal of any earnings you will have to pay taxes and penalties on them).

This makes a Roth an attractive option for investors who expect to be in a higher tax bracket during retirement than they are now. A Roth IRA can also offer some spending flexibility in retirement, as money can be withdrawn without increasing your tax bill and you won’t have to take annual required minimum distributions (RMDs) after you turn 70½.

How much can I contribute?

The maximum amount you can contribute to a traditional or Roth IRA in 2019 is $6,000, up from  $5,500 in 2018. The catch-up contribution for those ages 50 or older remains $1,000, bringing the total contribution for those 50 and older $7,000. However, there are some rules that affect IRA contributions and deductibility. Here’s an overview:

Traditional IRA

There is no income limit for contributing to a traditional IRA, and the contribution is fully deductible if neither you nor your spouse was covered by a retirement plan at work during the tax year. However, if either of you was covered by a workplace retirement plan, deductibility phases out depending on your filing status and income:

 

Filing status (2018 tax year) Fully deductible if income is below: Partial deduction if income is between: No deduction if income is above:
Single $63,000 $63,000 to $73,000 $73,000
Married filing jointly, filer is covered $101,000 $101,000 to $121,000 $121,000
Married filing jointly, spouse is covered $189,000 $189,000 to $199,000 $199,000
Married filing separately   $0 to $10,000 $10,000

 

Filing status (2019 tax year) Fully deductible if income is below: Partial deduction if income is between: No deduction if income is above:
Single $64,000 $64,000 to $74,000 $74,000
Married filing jointly, filer is covered $103,000 $103,000 to $123,000 $123,000
Married filing jointly, spouse is covered $193,000 $193,000 to $203,000 $203,000
Married filing separately   $0 to $10,000 $10,000

Source: Internal Revenue Service

 

Roth IRA

Roth IRA contributions are made with after-tax dollars. You can contribute to a Roth IRA only if your income meets certain limits:

Filing status (2018 tax year) Full contribution allowed if income is below: Partial contribution allowed if income is between: No contribution allowed if income is above:
Single $120,000 $120,000 to $135,000 $135,000
Married filing jointly $189,000 $189,000 to $199,000 $199,000
Married filing separately   $0 to $10,000 $10,000

 

Filing status (2019 tax year) Full contribution allowed if income is below: Partial contribution allowed if income is between: No contribution allowed if income is above:
Single $122,000 $122,000 to $137,000 $137,000
Married filing jointly $193,000 $193,000 to $203,000 $203,000
Married filing separately   $0 to $10,000 $10,000

Source: Internal Revenue Service

 

So if you do qualify for a traditional IRA (with the ability to deduct contributions) and a Roth IRA, how do you choose between them? Here are thoughts and guidelines to help you make a decision:

If you think your tax bracket will be higher when you retire than it is today, you may consider a Roth IRA—especially if you’re a younger worker who has yet to reach your peak earning years.

Roth and traditional IRA, marginal tax rate now and in retirement

 

Note: Calculations assume a $5,000 starting pretax contribution in the deductible IRA and a $3,750 post-tax contribution, at a 25% marginal tax rate, in the Roth IRA. The hypothetical examples assume a 6.5% average annual return over 25 years. The traditional deductible IRA taxes at withdrawal are a based on a 30%, 25%, and 20% marginal income tax rate.
 

If you think your tax bracket will be lower when you retire, you may be better off taking the up-front deduction of a traditional IRA. If you think your tax bracket will be the same when you retire, it’s almost a wash for income tax purposes. However, you aren’t subject to RMDs with a Roth, and if you leave it behind when you die, your heirs can stretch out their own tax-free withdrawals. A Roth IRA can also be a flexible source of retirement funding: You can withdraw a large sum, if you have a large one-time expense or other needs in retirement, without increasing your tax bill. Allocating a portion of your retirement savings to a Roth can increase the flexibility you have to manage taxes in retirement. 

Another advantage of a Roth IRA is that contributions may be withdrawn any time for any purpose without tax or penalty. However, just because you can do this doesn’t mean you should. The opportunity costs are high—taking money out of your Roth IRA means you may miss out on compounding interest. When you can put in only $6,000 for 2019, plus an additional $1,000 “catch-up” contribution if you’re age 50 or older, taking out previous contributions may be hard—or even impossible—to make up.

Finally, we can’t know with certainty future tax rates.  Contributing part of your retirement savings dollars to a Roth IRA after paying taxes can add tax diversification of your retirement savings in the event Congress increases tax rates in the future or when you retire.

Direct rollovers

If you change jobs, you have the option to convert a traditional 401(k) directly into a Roth IRA without having to roll it into a traditional IRA first. Just remember you must pay federal income tax on pretax contributions and earnings at the time of the rollover. Also, remember that you have other options, including keeping your assets in your former employer’s plan, rolling over assets to your new employer’s plan, or taking a cash distribution (on which taxes and possible withdrawal penalties may apply).

Roth 401(k)

An increasing number of employers are offering Roth 401(k) options in addition to traditional 401(k)s. With a Roth 401(k), you can contribute a portion or all of your paycheck up to certain limits. You can also choose to have some of your paycheck go pre-tax into a traditional 401(k) and some post-tax into a Roth 401(k). Any employer match or contribution, however, must go into a traditional 401(k).

Unlike Roth IRAs, Roth 401(k) contributions are not subject to earnings limits. This means that if you aren’t eligible to contribute to a Roth IRA because your income is too high, you may be able to contribute to a Roth 401(k). Distributions from a Roth 401(k) are subject to the same general tax rules as a Roth IRA, with exception of an RMD requirement starting at age 70 ½. You can avoid this by rolling over a Roth 401(k) balance into a Roth IRA. So if you’re eligible, don’t forget the Roth 401(k) option if a Roth makes sense for you.

Roth IRA conversions

If you’re ineligible for a Roth IRA, some investors maximize contributions to a traditional IRA so you can convert to a Roth. However, there are some caveats:

You can’t pick and choose which portion of traditional IRA money is converted. The IRS looks at all traditional IRAs as one when it comes to distributions (including Roth conversions). Traditional IRA balances are aggregated so that the amount converted consists of a prorated portion of taxable and nontaxable money. So making nondeductible contributions to a traditional IRA with the goal of later converting to a Roth IRA would likely work best if you have little or no existing deductible IRA balance to muddy the waters. Still, any earnings leading up to conversion would be subject to income tax (which, as always, is best paid from outside funds).

High earners not eligible to make Roth contributions could make nondeductible contributions to a traditional IRA and then convert to a Roth (sometimes called a “backdoor Roth conversion”). The process is similar to any other Roth conversion, but typically takes place very soon after contributing funds to a traditional IRA. There is some debate among tax professionals about whether doing this conversion immediately or repeatedly could be outside Congressional intent when they changed the Roth conversion law in 2010.

The IRS has not formally weighed in on this topic, so be aware that there may be some risks to this strategy. If the IRS decides to question the conversion, you may owe a 6% tax or other taxes for overfunding your Roth. For some investors, this type of Roth conversion could be a viable way to obtain the benefits of tax-free growth, so long as they’re comfortable with the potential uncertainty, and work with a certified public accountant (CPA) or tax professional.

The bottom line

A Roth IRA can be a great long-term savings tool, so try to take advantage of these rules if you can. Just remember that tax laws are subject to change, so check out the IRS’s Latest News page regularly for updates. Also, be sure to talk with your accountant or other professional tax advisor about whether a Roth IRA makes sense for you