When economic conditions are unsure, and there is any sort of worry around, both companies and consumers are generally reluctant to spend money, and with good reason. Who wants to put their capital at risk if there is a potential for an economic downturn like a recession? That’s when excess cash goes into the bank for the proverbial rainy day.
The good news for the United States is that consumer and business optimism is at heights not seen in years. The combination of less onerous regulations and a positive tax reform law have both small and large business ready to spend and invest.
In a new research report from Jefferies, the analyst sees the potential for a solid increase in capital spending, and the report highlights five stocks rated Buy that look like solid bets to benefit from that increase.
This stock could very well benefit from an increase in information technology (IT) spending. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.
Last year the company introduced a highly integrated polyphase analog front end with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.
The analysts believe that the Linear Technology acquisition, which closed earlier this year, is a huge positive. In addition, many on Wall Street expect that corporate management ultimately will exceed its $150 million of targeted synergies.
Analog Devices investors are paid a solid 2.05% dividend. The Jefferies price target for the shares is $110, and the Wall Street consensus price target was last seen at $102.86. The stock closed Monday’s trading at $93.50 a share.
This lesser known company is expected from increased spending on industrial construction. Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products and related materials and services in the United States and internationally. It operates through five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mill, and International Marketing and Distribution.
As one of the leading suppliers to the nonresidential construction sector, Commercial Metals has revived as that area of the market has picked up. The U.S. Architecture Billings Index (ABI), an economic indicator that provides 9-to-12-month growth forecast of nonresidential construction spending activity, which has shown very consistent growth.
Shareholders of Commercial Metals are paid a 2.0% dividend. Jefferies has a $29 price target for the stock, while the posted consensus target is $27.38. The shares closed at $23.71 on Monday.