Oracle Corporation (ORCL), Colgate-Palmolive Company (CL): Three Great Stock Picks From Credit Suisse’s Focus List

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Oracle Corporation (NASDAQ:ORCL)A great place to look for new stock ideas is in Credit Suisse's "Focus List.” The Focus List has outperformed the S&P 500 in 6 of the past 9 years, sometimes by a wide margin.

To clarify, the Focus List isn't simply stocks that Credit Suisse has a "buy" rating on. Much like Goldman Sachs Group Inc (NYSE:GS)' Conviction Buy List, the Focus List is a select small number of stocks that Credit Suisse feels most bullish about.

With the second half of the year upon us, Credit Suisse believes that these stocks are set for gains.

Obamacare bull

There's a lot of talk about The Affordable Care Act (aka "Obamacare") and business, and most of it is bad. But do you ever hear people discuss who the potential benefactors of the law will be? I don't.

Every law or regulation has winners and losers, even if the overall business community suffers, winners will emerge. One potential winner would be a few select insurance companies, whom are poised to add as many as 45 million new customers, and clearly Credit Suisse feels that CIGNA Corporation (NYSE:CI) will be a winner.

CIGNA Corporation (NYSE:CI) is a global health service company, with insurance subsidiaries that are providers of medical, dental, disability, life and accident insurance and related products and services. The stock has been on an absolute tear since Credit Suisse added it to the list (12/31); gaining over $30 per share this year alone, it has nearly doubled.
This stock has outpaced the S&P 500 by 20% this year, yet earnings are still set to make further gains over the next two years. The company is expected to increase earnings from the $6 range, to over $8 per share by 2015. That would make its current P/E ratio of 16 look much more attractive, somewhere below 10. It's quite impressive that such high growth is expected even after the stock has come so far, so fast.
Technically, a value
When it comes to value stocks, tech giant Oracle Corporation (NASDAQ:ORCL) is typically not the first name that comes to mind. This tech giant provides enterprise software as well as hardware products, services, and other products at the forefront of technology. Taleo, for instance, a staple applicant tracking and customer tracking business platform, is an Oracle Corporation (NASDAQ:ORCL) product. Aside from the high tech products the company sports a  P/E ratio of just 13, not bad considering the company has a five year earnings growth rate over 16%. That value, along with exceptional cash flows, could be a reason that Credit Suisse added Oracle Corporation (NASDAQ:ORCL) to the Focus List in December of last year.
Seven months later, this stock is actually a rare Focus List name that has underperformed the S&P 500. That's not always a bad thing: if the business still has a lot going for it, you'd rather buy it at a cheaper price than an inflated one.
Despite the high tech product line, I think one of the biggest catalysts for Oracle Corporation (NASDAQ:ORCL) is the possibility of a dividend increase. The company's paltry 1.5% yield could be much higher, and likely will be. Oracle is one of many "old tech" companies that still has dominant market share, gobs of cash, and great fundamentals, yet struggles to excite investors. So why not give some of that cash back to shareholders?
Return on capital at Oracle Corporation (NASDAQ:ORCL) is around 14%, and its payout ratio is around 25%; there's more than enough cash to raise the dividend. So I say, buy it for growth now and love it for the dividends later.
Oracle Corporation (NASDAQ:ORCL) holds dominant market share in its major markets, which contributes to solid cash flows. Investors will need to watch growth in database and application software licenses, which accounts for over 50% of revenues. If those hold up, the stock will as well.
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