Merrion makes top stock picks but warns of volatility
Published 08/07/2015 | 02:30
Walmart, Molson Coors and Johnson & Johnson are among the top stock picks for Merrion Stockbrokers in its latest global investment strategy outlook.
But Merrion has also warned that as the second-quarter earnings reporting season approaches, there is an "increased risk of disappointment" for US companies in terms of corporate results and their respective outlooks given the strengthening of the dollar and the impact of lower commodity prices.
General Electric, UK drug maker AstraZeneca, Imperial Tobacco and Munich Re are also among the stocks favoured by Merrion.
It said that Walmart, the world's largest retailer, has "stood the test of time" and that recent share price weakness has provided an attractive entry point for investors.
Merrion pointed out that Walmart generates a significant amount of free cash flow - about $16bn a year - and still has scope for $10bn of stock buybacks under a $15bn programme that was authorised in 2013.
The stockbroker predicted that Molson Coors could benefit from further consolidation in the sector, and that the beer company retains a strong set of market positions in the US, Canada and the UK.
Merrion said that given that consolidation within the alcoholic beverage sector is continuing to accelerate, Molson Coors is likely, over time, to be able to acquire the 58pc stake in the MillerCoors US joint venture that is owned by SABMiller.
The broker said that AstraZeneca is a potential takeover target for a larger competitor.
It noted that the firm has endured "several challenging years" as it coped with the patent expirations but has successfully built a pipeline of new drug candidates.