From boob jobs to Mr Potato Head: Five US stocks to beat the downturn

The US may be set for a protracted period of low growth, but the market continues to throw up opportunities for the bottom-up stockpicker, says Ignis’s Terry Ewing.

From boob jobs to Mr Potato Head- the group’s head of North American equities highlights five stocks that are undergoing fundamental company-level changes that will help them beat analyst expectations and outperform the market.

DirecTV

DirecTV is a satellite broadcaster with operations in North and South America, which is a market leader having invested consistently in research and development. The firm has been successfully expanding into Latin America, which now accounts for $4 billion of its $30 billion of revenues.

‘Management intend to buy back as much as $12bn of its own stock over the next two years,’ Ewing says. ‘When you consider this in the context of the company’s $34bn market capitalisation, it is clear that having such a big buyer in the market for a protracted period of time should give the share price excellent support, and enable the stock to outperform.’

Dover

Dover is a diversified industrial company, which supplies high-technology components to a range of end markets, including smart phones, aviation and fluid management. Although it does sit in the industrial sector, Ewing says that in many ways it would be better described as a technology stock and because of this its earnings are underrated.

‘The management has an ambition for every part of the group to provide earnings growth of 10% or more and operating margins of 15% or more,’ he says. ‘This strategy should vastly improve return on equity, and allow the company’s shares to be re-rated upwards.’

Allergan

Allergan is a healthcare company operating in four main markets. It is a global leader in eyecare, producing products that test for glaucoma and dry eye. It is also working on blindness treatments, which have great potential. The company is also a specialist in obesity intervention making gastric bands and is a leading supplier of silicone gel breast implants and Botox treatments.

‘We believe the FDA is close to approving Botox as a treatment for migraines, which is currently an unmet medical need, and a huge market that could be worth around $1bn a year,’ he says. ‘There are many other potential uses for Botox, which was originally approved to treat twitching eye muscles.’

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