Oppenheimer Portfolio Strategy: US MAER Best Ideas

In a report issued Thursday, Oppenheimer analysts Andrew Burkly, Sam Burns and Scott Davies share their US MAER Highlights for September 2015. According to the note, revisions activity in the US eased once more in August. The percentage of Russell 1000 stocks with positive revisions trends fell to 47 percent, 1 percentage point below July’s proportion and 2 points below June’s (see Exhibit 1).

As the second-quarter earnings season came to an end, with companies posting “reasonable results outside of the Energy sector, there was not much net movement in revisions trends at the aggregate level, despite some worrisome headlines about slowing growth in China and related market volatility in the second half of August.”

Favorable & Unfavorable Sectors

In an environment of declining commodity prices, Oppenheimer believes the Materials sector is, by far, the weakest. Only 22 percent of the companies in this group exhibit positive revisions trends, down from 26 percent in July. Second in line is the Energy sector, which saw 30 percent of its components showing a trend of positive revisions – same as in the previous month.

The Consumer Staples sector witnessed the largest decline (13 percent) in positive revisions, which now reach 43 percent of its components.

On the other hand, investors can find the small Telecom and the Healthcare sectors. Despite a small decline over August, the latter continues to have the highest percentage of positive revisions (leaving small Telecom’s aside), trailed by Consumer Discretionary, Technology, and Financials.

Best Ideas

Stocks that are both Outperform rated and in Oppenheimer’s Favorable list include:

• Valero Energy Corporation VLO
• HollyFrontier Corp HFC
• Amazon.com, Inc. AMZN
• Bank of America Corp BAC
• Nuance Communications Inc. NUAN
• Juniper Networks, Inc. JNPR
• AT&T Inc. T

Among stocks in the Unfavorable list, those that the firm rates as Perform or Underperform include:

• ConocoPhillips COP
• Marathon Oil Corporation MRO
• Murphy Oil Corporation MUR
• Sally Beauty Holdings, Inc. SBH
• Sprouts Farmers Market Inc SFM
• Yelp Inc YELP
• 3D Systems Corporation DDD
• Cognex Corporation CGNX
• Marvell Technology Group Ltd. MRVL

The best ideas of the month, by sector are:

• In Energy: Rowan Companies PLC RDC
• In Materials: Westlake Chemical Corporation WLK
• In Industrials: Orbital ATK Inc OA and Jacobs Engineering Group Inc JEC
• In Financials: Bank of America