by The Associated Press Jul 14th 2013 7:40AM
Updated Jul 14th 2013 8:02AM
Richard Drew/AP By ALEX VEIGA
LOS ANGELES -- It's summertime and the stock market is sizzling. The market reached an all-time high last week, torching its previous record set just before Memorial Day.
Even so, a handful of companies stand out. Six stocks -- Amazon, Starbucks, UnitedHealth, Visa, Mastercard, and Discover Financial -- notched their own records last week, helped by the growing confidence of American consumers.
Would buying these stocks now be a hot-weather impulse or a coldly calculated move?
All six have improving earnings outlooks, analysts say. Credit-card companies and UnitedHealth appear to be the best bets.
The six companies share similar traits that make them attractive. They are consumer-focused, with dominant market positions and growing revenue streams, says Fred Dickson, chief investment strategist at D.A. Davidson & Co.
Their importance to shoppers is crucial to their growth prospects. Americans' confidence in the economy has reached its highest point in 5½ years. The housing recovery is strengthening. Job growth continues at a steady pace.
When consumers feel better about the economy, they splurge on discretionary items like a Venti Caramel Macchiato from Starbucks or a new book or DVD from Amazon. And they pay for those items with credit cards.
Visa and UnitedHealth are the most attractive buys right now, says David Brown, chief market strategist at Sabrient Systems, an investment research firm.
The outlook for Discover and MasterCard is also good, particularly as consumer confidence improves. The companies' biggest challenge remains staying competitive in a crowded field, he says.
While Brown expects Amazon to continue to dominate its market, he sees a big risk in buying the stock now.
"It's a fine company, but I would want to enter it in a pullback -- a big pullback," Brown says. "It has, by far, the most downside."
Here's a brief summary of each stock:
UnitedHealth Group Inc. (UNH)
The stock of the nation's largest health insurer has climbed more than 25 percent this year and hit an all-time high of $68.75 in trading Wednesday, according to FactSet.
Like other health insurers, UnitedHealth stands to benefit from the federal health care overhaul. The company will be able to participate in state-based health insurance exchanges designed to expand coverage to millions of uninsured Americans. The company is also the largest provider of Medicare Advantage plans, which are privately run versions of the government's Medicare program for the elderly and disabled people.
Financial analysts, on average, expect the stock to move higher. Their consensus target price is $71.47, according to FactSet.
On average, the stock has a "Buy" rating from analysts polled by FactSet.
Amazon.com Inc. (AMZN)
Amazon's stock price is up about 23 percent this year and touched an all-time high of $307.55 in trading on Friday.
Sales for the world's biggest online retailer have been growing as Americans' confidence in the economy improves and they shift to online shopping. A key rival, Barnes & Noble Inc. (BKS), is struggling with weaker sales and big losses driven by its Nook e-reader, a competitor to Amazon's Kindle.
Analysts see Amazon shares moving higher still. The average target price on the stock is $316.79.
Even so, some investment experts sense a bubble.
Brown has a "Sell" rating on the stock, which he believes is overpriced. He points to Amazon's "forward" price-earnings ratio, which compares a stock's price to projected earnings over the next 12 months. Not all agree. Amazon has an average analyst rating of "Overweight," which indicates the average broker rating falls between "Hold" and "Buy."
On that basis, Brown says investors buying Amazon's stock now are paying 100 times future earnings.
Starbucks Corp. (SBUX)
Starbucks' stock is up 30 percent this year and reached an all-time high of $69.72 in trading on Friday. That's barely above the consensus target price of $69.62, according to FactSet.
The coffee chain, with more than 18,000 stores around the world, has delivered strong growth in the Americas and Asia, where it has opened more shops. Last year it introduced a single-serve coffee machine and branched out beyond coffee by acquiring tea shops and bakery chains, and a bottled juice company.
But it faces increased competition from fast-food chains such as McDonald's (MCD), which have expanded their coffee offerings. On average, the analyst rating on the stock falls between "Buy" and "Hold."
MasterCard Inc. (MA)
The stock is up 22 percent this year and reached an all-time high of $602.74 in trading on Monday.
The credit- and debit-card company, which makes money from processing charge-card transactions, thrives when consumers are in a spending mood.
MasterCard has been focusing on developing countries, where most transactions are still done in cash. As shoppers there shift from paper money to plastic, MasterCard can tap into that growth.
A consensus price target of $614.61 suggests that financial analysts see further growth ahead for the stock. But those surveyed by FactSet are split between "Buy" and "Hold."
Visa Inc. (V)
Visa's stock is up about 26 percent this year and reached an all-time high of $192.77 in trading on Monday. Visa remains the industry heavyweight. It has also taken steps to make its payment-processing business more accessible to mobile-device users.
"Visa has done an amazing job, really, of capturing revenue and new cardholders and turning it into earnings," says Brown.
Analysts see the stock advancing. Its consensus target price is $197.12. Analysts polled by FactSet are divided between recommending a "Buy" and a "Hold."
Discover Financial Services (DFS)
Discover's stock is up 32 percent this year. It rose to an all-time high of $50.92 in trading on Friday -- below the consensus target price of $52.73.
Beyond its namesake credit card, Discover has moved into auto, personal and student loans, as well as home equity loans.
The Fed's signal last month that it could begin tapering its bond-buying program, which has helped keep interest rates low, is potentially good news for Discover and other credit card issuers. As interest rates rise, they typically translate into more revenue for card issuers. That's something investors are anticipating, says Dickson.
On average, the stock has a "Buy" rating from analysts polled by FactSet.
Brand Value: $27.8 billion
Percent Change v. 2012: 34%
What Happened: MasterCard's rank flew up nine spots this year to the 20th most valuable brand in the world, and Millward Brown VP Oscar Yuan attributes that ascent to "the growth of mobile technology." As consumers up their online shopping habits, brands like Mastercard and Visa reap the rewards for offering noncash payment methods.
20. MasterCard
Brand Value: $34.36 billion
Percent Change v. 2012: 34%
What Happened: "They're really into the big data," Yuan explained of the German tech brand, "So [the increase in value] is reflective of a consistent storyline: The growth of mobile shopping." SAP has the big data solutions enterprise companies need.
19. SAP
Brand Value: $36.2 billion
Percent Change v. 2012: 5%
What Happened: Walmart, however, has mastered the art of brick and mortar shopping. "You can't buy milk online," Yuan said. The retail giant has a large and loyal consumer base that is constantly growing - even internationally.
18. Walmart
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Brand Value: $39.7
Percent Change v. 2012: -8%
What Happened: Vodafone's 8% drop in value can be attributed to O2 and Orange's recent success. But at almost $40 billion, it is still one of the largest mobile carriers in the UK.
17. Vodafone
Brand Value: $41.1 billion
Percent Change v. 2012: -1%
What Happened: While Americans might have never heard of the Industrial & Commercial Bank of China, Yuan explains that in its home country, "the logo is ubiquitous." ICBC is the first of two Chinese brands in the top 20, a number which is largely due to the countries growing middle class.
16. ICBC
Brand Value: $42.7 billion
Percent Change v. 2012: 15%
What Happened: "I think a lot of the growth is really tied to several consumer trends - and I'm talking about the need for consumers to shop online mobile devices," Yuan told BI. Consumers need to get the products they bought on the internet somehow, and that's where UPS comes in.
15. UPS
↵
Brand Value: $45.7 billion
Percent Change v. 2012: 34%
What Happened: It's almost impossible for brick and mortar shops to compete with Amazon's wide selection, low prices, and mastery of the mobile marketplace - easily allowing consumers to buy anything from anywhere on their phone or tablet. Recent acquisitions of Audible.com and Goodreads also show the company's determination to dominate all aspects of mobile book consumption and sharing.
"There's no stopping amazon as they go international," Yuan said."
14. Amazon
↵
Brand Value: $47.7 billion
Percent Change v. 2012: 20%
What Happened: After acquiring Wachovia in 2008, Wells Fargo successfully expanded from a California-based bank to a national name. Coming from California also helped Well's Fargo's image with consumers considering that it was one of the few banks to remain unscathed during the financial crisis. "It also started a major rebranding strategy expansion," Yuan said.
13. Wells Fargo
Brand Value: $53 billion
Percent Change v. 2012: 8%
What Happened: Verizon got a boost after Apple opened its services to carriers other than just AT&T. While Verizon and AT&T's rivalry heats up, Yuan predicts that the competition will up both brands' game. "As data devices continues to proliferate, we will continue to see Verizon do well," he said.
12. Verizon
Brand Value: $55.3 billion
Percent Change v. 2012: 21%
What Happened: "GE ... continued to be one of the most well respected consumer and industrial brands in the world," Yuan said. And the public is starting to see that it makes more than just light bulbs. General Electric has dedicated major marketing dollars to making sure that consumers know it produces everything from airplane engines to wind turbines to medical equipment. Hammering in its dedication to innovation, a recent ad campaign even enlisted the help of famous robots.
"In terms of B2B, GE is one of the most well respected brands," Yuan continued, citing that it was often used in business school case studies.
11. GE
Brand Value: $55.4 billion
Percent Change v. 2012: 18%
What Happened: China Mobile is the largest mobile carrier and brand in China, so it's a no-brainer that it's one of the most valuable brands in the world. "There are more mobile phone subscribers in China than in the U.S.," Yuan said.
10. China Mobile
Brand Value: $56 billion
Percent Change v. 2012: 46%
What Happened: A key way to bolster global presence is to sponsor the Olympics. But that's not the only thing that upped Visa's brand value so drastically. As one of the most trusted names in non-cash payments, Visa has gained clout in the world of online shopping and mobile payments.
9. Visa
Brand Value: $69.4 billion
Percent Change v. 2012: -6%
What Happened: Marlboro is a top 10 regular, which goes to show that even though smoking is restricted in the U.S. doesn't mean that the rest of the world has laid off the habit. "Marlboro has consistently invested in the brand ever since its inception," Yuan said. "The rugged cowboy is very strong and consistent globally."
To put it another way, "about 25% of world's population are smokers, and they use it 5 to 10 times a day. I don't drink 10 bottles of water a day." That's getting your brand out there.
8. Marlboro
Brand Value: $69.8 billion
Percent Change v. 2012: -9%
What Happened: As a $70 billion brand, Microsoft is in great shape even in spite of a 9% value decrease. Microsoft is a powerhouse and has a reputation as one of the strongest tech brands in the business. But, Yuan notes, "with consumers, there's confusion as to where Microsoft fits." The company's fortune is largely tied with the PC business, but it has emerged on the mobile scene with the Surface and other devices. The company went through a major rebranding in the summer of 2012 to stay relevant.
7. Microsoft
Brand Value: $75.5 billion
Percent Change v. 2012: 10%
What Happened: AT&T is another company to gain value due to the increasing U.S. consumption of mobile products. For a long time, the service provider had an exclusive deal with the iPhone, so it became synonymous with the new technology. What's really interesting, however, is that even when Apple opened the iPhone up to Samsung and T-Mobile, AT&T's value didn't go down.
6. AT&T
Brand Value: $78.4
Percent Change v. 2012: 6%
What Happened: "What's consistently impressive about Coca-Cola is its ability to innovate," Yuan said. "People think that soda consumption is declining, but Coke is turning the business on its head." For example, this year Coca-Cola released a series of freestyle machines which allows consumers and retailers to mix their own flavors of the soda syrup to make their own individual Coca-Cola. The company is constantly innovating and staying fresh.
5. Coca-Cola
Brand Value: $90.3 billion
Percent Change v. 2012: -5%
What Happened: Yuan noted that one of McDonald's gifts was the ability to listen to consumers' sentiments and adapt, particularly to growing health concerns. "It has come out with a much healthier menu with apple slices, oatmeal, and a Chicken McWrap which has done well," he said.
McDonald's is also gaining a stronghold in the coffee space, which should be an interesting new endeavor to follow.
4. McDonald's
Brand Value: $112.5 billion
Percent Change v. 2012: -3%
What Happened: At $112.5 billion, IBM's three percent value decrease is not a substantial figure. IBM is known as a company that consistently delivers year after year, Yuan told BI. And it is particularly hailed in the B2B sphere.
Yuan also noted that its Ogilvy-made "Smarter Planet" campaign, in which the company explained its plans to help clients innovate and make the world a better place, inspired consumers to believe in the brand.
3. IBM
Brand Value: $113.7 billion
Percent Change v. 2012: 5%
What Happened: Google has effectively taught consumers that it is more than just a search-based company. With maps, mail, shopping, and more, Google is integrated into everyone's lives. The company also made recent headlines about its new contribution to the hardware world in the form of Google Glass. "It will be interesting to see how Google Glass will contribute to the brand value, but now it's too soon to tell," Yuan said.
2. Google
Brand Value: $185 billion
Percent Change v. 2012: 1%
What Happened: In spite of harsh Wall Street analysis and media speculation regarding Tim Cook's leadership capabilities, Apple continues to be a strong brand in the eyes of consumers - a major value measurement for Millward Brown. "Despite what the press says and stock market says," Yuan noted, "Apple in the eyes of the consumers is the gold standard."
In the last eight years, Apple's value has increased 1,045% - only topped by Subway's meteoric 5,145% rise. (Although Subway still hasn't broken the top 20.)
Those companies are constantly innovating to stay on the top.[Those companies are constantly innovating to stay on the top.]The gay pride Oreo, from Kraft's Facebook page.
1. Apple
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