The February stock market rout created a tremendous opportunity for long-term investors. Everyone is asking which stocks make sense for the rest of 2018 and beyond. The following five stocks are my favorite large-cap names for a buy-and-hold portfolio.
1. United Parcel Service (NYSE: UPS)
Shares of this package delivery service have plunged around 30% from their January 2018 highs. The February market plunge resulted in a steep gap, exasperating an already dire situation.
Fundamentals supporting the bullish call include the dividend increase of 10% in February. The company has increased dividends every year since 1969, and they have quadrupled since 1999. UPS boasts a healthy cash flow to support the ever-growing payout to investors.
CEO David Abney stated, "Dividends remain a high priority at UPS. Our strong cash flow from operations has enabled us to pay a stable or growing dividend for nearly 50 years."
Next, the company has been knocked lower due to a perceived Amazon threat; however, it still boasts the top margins in the industry. Also, it has posted a compound annual growth rate (CAGR) of over 7% for the last 10 years.
I firmly believe that the Amazon threat is way overblown, and UPS will return to its yearly highs over time.
Action To Take: Buy UPS in the $105.00 per share zone with initial stops at $96.93 and a target price of $135.00 per share.
2. AbbVie (NYSE: ABBV)
This favorite stock of Wall Street has been trading above its 50-day simple moving average (SMA) since November 2016. Even the February sell-off did not cause the price to violate support at the 50-day SMA. This tells me one thing: Big money is watching the primary technical indicator and buying every pull back!
Fundamentally, the pharmaceutical company is reliable, as evidenced by a recent 35% dividend raise, a $10 billion stock buyback program and a 2017 patent suit victory.
Action To Take: Buy on an upside break of $125.00 per share OR buy on a pullback to the 50-day SMA in the $105.00 per share zone. Initial stops set 20% below your entry level, and the target price is $165 per share.
3. Facebook (Nasdaq: FB)
The social media behemoth plunged to significant technical support at its 200-day SMA during February's selling. Price bounced from the support level and is now hovering directly below the 50-day, setting up an ideal break out buy situation.
Facebook is expected to grow earnings by an astounding 30% over the next five years, and the company boasts a PEG ratio less than one.
I love the fact that the company is starting to exploit its multiple untapped sources of profits such as Watch, Marketplace, Workplace, and the billion-user Messenger platform.
At the current valuation, I see only upside for Facebook.
Action To Take: Buy on a break above the 50-day SMA at $181.55 with a target price of $247.00 per share. Initial stops make sense at $167.83 per share
4. PayPal (Nasdaq: PYPL)
The leading digital payment processor posted strong numbers, but the fact that eBay plans to eliminate using the service greatly dampened the enthusiasm.
Presently, shares are resting directly on the 50-day SMA, and I expect an upward move from here.
The reason: Strong results and the fact that eBay only represents around 13% of PayPal's total payment volume. In other words, the market overreacted to the bad news and underreacted to the sound numbers.
PayPal was the first successful mover in the digital payment space. The numbers, goodwill, global brand recognition, and customer base will push the share price higher over the long term.
Action To Take: Buy now in the $77.80 zone with a $96.00 per share target price. Consider setting initial stops at $71.43 per share.
5. Caterpillar (NYSE: CAT)
This play on the global infrastructure boom shares is sitting directly on their 50-day SMA, creating an ideal entry point for long-term investors.
Shares were knocked off their January highs to below support and have just broken above, painting a bullish picture for the stock.
U.S. tax reform, Trump's massive infrastructure spending plan, and robust 2017 revenues make the CAT a no-brainer buy at the current levels.
Action To Take: Buy CAT now at $161.00 with a target price of $220.00. Initial stops make sense at $144.47 per share.
Editor's Note: It's the most surprising portfolio most investors won't invest in... though some of these blue chips have doubled the market each of the past three years. Click here for the full report.