5 Stocks I Like for 2016's Second Half

I wrote earlier this week about how crazy the market was in the first half, and I said that I'd use a future column to talk about some bargains that I see out there for the second half. Well, here goes. Let me first say that putting funds to work in this market is like investing in a Bizarro World. We got more confirmation of that yesterday when word emerged that half of the eurozone's $6.4 billion of sovereign debt now carries negative yields. Who saw that coming a few years ago? Meanwhile, the British pound continues to sink to multi-generational lows. Both Citi and Goldman Sachs think that sterling will touch 1.20 or lower against the U.S. dollar before its decline ends. That's great news for the London trip that I'm planning for September, but I don't think it's a positive sign for global equity and currency markets. Let's look at how I expect a few market sectors to perform in 2016's second half, along with some names that I like: Energy I'm not a big fan of the energy sector, as crude has already had a huge run-up from its February lows. However, oil seems to have now hit serious resistance at the $50-a-barrel range, while global demand remains anemic and the dollar should continue to strengthen. Banks and Multinationals Financials look cheap on both a book-value and earnings basis. However: I don't see U.S. banking regulations relaxing under a potential Hillary Clinton/Elizabeth Warren ticket. Falling yields continue to compress net interest margins. The European banking system's lack of stability has to be a worry. Meanwhile, I expect U.S. multinationals to continue to face challenges from declining foreign currencies and weak overseas demand. Biotechs Biotechs look like they're one place that offers value in this market. The sector has been stuck in its longest, deepest bear market since 2008, but it seems like it's finally putting in a bottom (although it's too soon to know if a rebound will be forthcoming). Large-cap biotechs are selling at their lowest collective valuations since 2011, even though they're one of the few market areas actually seeing consistent revenue and earnings growth. I think Celgene (CELG) is one good bet here. Jefferies just named the stock as one of its top growth picks for 2016's remainder, and I believe that CELG has years of stellar growth ahead of it. It's also priced at just a slight premium to the overall market on forward-price-to-earnings basis. Looking at some smaller biotech names, I like the current price on Progenics Pharmaceuticals (PGNX), which I've profiled previously. The U.S. Food and Drug Administration will likely approve an oral version of Progenics' key product Relistor on July 19. This should significantly boost sales and serve as a long-term catalyst for the stock. Xencor (XNCR) is also an earlier-stage-developmental company I like. XNCR recently signed a huge collaboration deal with drug giant Novartis (NVS) that will pay Xencor $150 million up front, plus up to $2.4 billion more if the firm meets various developmental, regulatory and sales milestones. Xencor will also receive royalties on any approved products. Autos Ford (F) and General Motors (GM) have overseas exposure, but the stocks are so cheap right now that any negative global events other than a major recession (which I don't expect) seem fully priced in. And while domestic auto sales seem to be plateauing at record levels, Ford and GM are both enjoying a nice sales mix of high-margin trucks and SUVs thanks to low gas prices. Both companies also continue to expand their market share in China, and each stock sports better than a 4% dividend yield. The Bottom Line The balance of 2016 seems likely to see continued volatility and represent a stock picker's market. All of the equities above are names that I think will perform well through the year's end.

5 Stocks I Like for 2016's Second Half

From Celgene to Ford, these names look promising.

Columnist Conversation

This Weekend on Real Money

Big Earnings Beat From Interface (TILE)

Thursday Morning Fibocall for 8/6/2020

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.