12 Stocks

to
Buy
for the
Second Half
of 2017
 he Dow Jones Industrial Average and the S&P 500 Index both

T returned more than 8% in the first six months of 2017, their best

performance in four years. The Nasdaq did even better, up 14%, posting

its best first-half gain since 2009.

The markets strong performance is encouraging but beneath the surface, there

are a number of factors that could derail this aging bull market, including a rise in

interest rates, tightening monetary policy and uncertainty over the ability of the

Trump administration to carry out its pro-business agenda.

As the second half gets underway, investors are wondering where to find smart,

strategic buys when overall market valuations are stretched by historical standards.

For guidance, we asked some of our top investment advisors for their best ideas for the

next six months (and beyond). Youll find their recommendations in this special report.

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John Dobosz
Forbes Dividend Investor, Forbes Premium Income Report

EQT Midstream Partners, L.P. (EQM)

Market Cap: $5.9 billion Revenue (ttm): $758.4 million Yield: 5.1%

Pittsburgh-based EQT Midstream Partners owns and operates natural gas pipelines, and is
sponsored by EQT Corp. (EQT), the company that recently purchased Rice Energy for $6.7 billion to
form the nations largest natural gas exploration, production and delivery company. EQMs transmission
segment owns approximately 900 miles of interstate pipeline, and the gathering segment includes
approximately 300 miles of high pressure gathering lines.
EQM stands to benefit from the acquisition of Rice by EQT, and the stock already trades at discounts
to average valuations over the past five years. At prices just below $75, EQM trades 25% below the
five-year averages of both its P/E and price-to-cash flow ratios, as well as 19% below its average price-
to-sales multiple. Revenue this year is expected to grow 14% to $841.5 million. Distributions have grown
25.3% annualized over the past three years, and at the current quarterly pace of $0.89 per unit, EQM is
good for a yield of 5.1%.

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Fastenal (FAST)
Market Cap: $12.2 billion Revenue (ttm): $4.1 billion Yield: 3.0%

Winona, Minn.-based Fastenal is one of the largest distributors of fasteners, tools and supplies used in
manufacturing, building, personnel protection and facilities maintenance. It sells its screws, bolts and
other devices under brands that include Agent, Aspect, Blackstone, Body Guard, Clean Choice, DynaFlo,
EquipRite, Northway, Power Phase, ProFitter, Regiment, Rock River, Stronghold, Talon and Tritan.
Sales this year are forecasted to rise 8.1% to $4.3 billion, with earnings up 8.5% to $ 1.88 per share.
FAST pays a quarterly dividend of $0.32, adding to the appeal of the stock, which trades at discounts to
multiple historical average measures of value, even as sales grow at a healthy clip. Whats particularly
encouraging is recent insider buying, with purchases by board members in April at prices around $45,
as well as the chief financial officer buying near current prices on May 25.

Gary Bogdon For Forbes

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Taesik Yoon
Forbes Investor, Forbes Special Situation Survey

Supervalu (SVU)
Market Cap: $871.5 million Revenue (ttm): $13.7 billion
Net Income (ttm): $615.0 million

Already down on concerns over the competitive environment, shares of beleaguered supermarket chain
operator and wholesale grocery distributor Supervalu fell even further in June after Amazons
announcement to acquire Whole Foods Market signified that the online retail giant was about to make
a serious push into the grocery market. Yet due to a number of unique barriersincluding high delivery
costs and the inability to inspect items, such as produceonline grocery sales have had a tough time
gaining with the broader customer base served by Supervalus traditional supermarkets and clients of its
wholesale distribution business. I dont see this changing any time soon.
Moreover, the company used the sizable proceeds from the December 2016 sale of its Save-A-Lot
operations to retire a huge portion of it debtthereby greatly improving its financial flexibilityand
also fund a key growth-driving acquisition of its own. Thus, I think investors are grossly overestimating
the impact the Amazon/Whole Foods deal will have on SVUs ability to continue turning its operations
around and expect its stock to rebound meaningfully in the second half of the year.

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FormFactor (FORM)
Market Cap: $1.0 billion Revenue (ttm): $520.0 million Net Income (ttm): -$6.9 million

After surging to a seven-year high in early June, shares of FormFactor, a leading global provider of
essential test technologies to semiconductor companies and scientific institutions, tumbled in the wake
of the sell-off in chip stocks that materialized since. But FormFactors earlier-year gains were well
deserved in my viewdriven by better-than-expected first quarter results and favorable guidance for
the recently completed second quarter. In fact, during a business update call with analysts in late June,
the company revealed that it expects revenue and adjusted earnings to reach $650 million and $1.50 per
share, respectively, over the next three to four years. This outlook, which implies nearly a 70% increase
in the top line and a tripling in profits from what FormFactor earned last year, suggests its strong recent
operating performance will continue well beyond 2017. As such, I believe those that take advantage of
the stocks recent dip could see themselves well rewarded by years end.

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Brad Thomas
Forbes Real Estate Investor

Tanger Factory Outlet Centers (SKT)

Market Cap: $2.3 billion Revenue (ttm): $476.4 million Yield: 5.6%

Greensboro, North Carolina-based Tanger Factory Outlet Centers is one of my top bargain REIT
recommendations. Although Tanger does not own malls or shopping centers with big box exposure,
there is definitely a blue light special flashing for this pure play outlet center REIT. I recently upgraded
Tanger from a buy to a strong buy based on the compelling fundamentals driving its diversified
portfolio of 44 outlet centers in 22 states and Canada.
Tanger set out to create a differentiated retail model that provides both scale and low-price brand
recognition aimed to meet the demands of bargain-hunting consumers. Tanger maintains significant
liquidity with about $72 million outstanding under unsecured lines of credit, leaving 86% unused
capacity or approximately $448 million (as of first quarter 2017). It has maintained a strong interest
coverage ratio of 4.22x and has paid dividends each year since it went public in 2003. Warren Buffett
owned Tanger 17 years ago, and today the company is in much better financial condition. Shares are
cheap, trading at 10.8x price to funds from operations (P/FFO) with a current dividend yield of 5.6%.

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Kite Realty Group (KRG)
Market Cap: $1.7 billion Revenue (ttm): $360.8 million Yield: 6.0%

Kite Realty Group has a portfolio of primarily need-based and value-oriented retailers such as
Publix, T.J. Maxx and PetSmart. About 93% of Kites tenants are considered Internet resistant (not
directly competitive with big players such as Amazon.com) or omni-channel (multichannel approach to
sales). More than 70% of its average base rent comes from the top 50 metropolitan statistical areasa
broad geographic reach that includes many major markets, such as Las Vegas, Dallas, Orlando, Raleigh,
Indianapolis and White Plans.
Kite has an attractive balance sheet with a modest payout ratio of 59% (one of the lowest in the
shopping center REIT sector), only $83.4 million of debt maturing through the year 2020, and a
liquidity position of more than $432 million. I have a buy rating on Kite with expectations that shares
could produce outsized returns in excess of 20% annually. This S&P rated BBB- REIT is trading at a
P/FFO multiple of 9.2x with a dividend yield of 6.0%.

Disclosure: Brad Thomas has a position in SKT and KRG.

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Richard Lehmann
Forbes/Lehmann Income Securities Investor

Black Stone Minerals LP (BSM)

Market Cap: $3.2 billion Revenue (ttm): $401.0 million Yield: 7.6%

Black Stone Minerals LP is a great vehicle for benefiting from the rebound in energy prices. This
master limited partnership is the nations largest publicly traded mineral and royalty company. It is also
one of the largest U.S. owners of oil and natural gas interests. The company maximizes value for
investors both by marketing its existing properties for lease and by acquisitions. First-quarter net
income increased by nearly five times from the previous year as higher energy prices drove an increase
in oil and gas production. The MLPs conservative, well-managed operations make its 7.6% current yield
a screaming buy for investors who can stomach some volatility risk.

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Banco Bilbao Vizcaya Aegenteria (BBVA)
Market Cap: $58.9 billion Revenue (ttm): $33.1 billion Yield: 6.4%

Banco Bilbao Vizcaya Aegenteria is the second largest banking company in Spain, and among the
largest banking institutions worldwide. Aside from its solid position in the Spanish market, BBVA ranks
as the largest financial institution in Mexico. The company also has a major presence in U.S. Sun Belt
markets through BBVA Compass Bank (aka Compass Bancshares). BBVA passed the 2016 European
stress test by a comfortable margin, and is also expected to pass this years stress test with similar ease.
BBVA ended the first quarter 2017 period with a solid common tier 1 capital ratio of 11.01%. It
reported first quarter net profit of 1.2 billion, a sharp 69% increase over a year earlier. Strong
performance was attributed to a significant drop in impairment charges, lower operating expenses,
higher trading profits and net interest income, and greater currency stability. Earnings momentum is
poised to continue and should lead to dividend growth. BBVAs common stock (ADR) fits well for
medium-risk investment portfolios.

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George Putnam
The Turnaround Letter

Arch Coal (ARCH)

Market Cap: $1.8 billion Revenue (ttm): $2.1 billion Yield: 1.9%

Arch Coal is one of the countrys largest coal miners, selling nearly 100 million tons of thermal and met
coal last year. Thermal coal from its Powder River Basin mines in the western United States contribute
about 92% of production, with met coal from its Appalachian mines producing the balance. Since its
formation in 1997, Arch grew through a series of acquisitions, culminating in the ill-timed purchase of
International Coal Group for $3.4 billion at the peak of the coal market in 2011. After a nine-month
bankruptcy process, the company emerged in October 2016 with an improved cost structure, new
leadership and a much cleaner balance sheet. It recently initiated a $1.40 per year dividend and
announced a $300 million share repurchase program.

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Gannett Company (GCI)
Market Cap: $951.1 million Revenue (ttm): $3.2 billion Yield: 7.7%

Gannett is the nations largest newspaper publisher, with its flagship USA Today plus daily newspapers
in 109 local markets in the U.S. and 160 local brands in the U.K. Revenues in 2016 were $3.0 billion. Not
one to sit still in the face of its secular headwinds, Gannett continues to make aggressive acquisitions,
such as its $280 million acquisition of newspaper company Journal Media and its $156 million
acquisition of ReachLocal, a promising digital marketing firm.
Gannetts digital presence is strong and growing: More than 23 million people have downloaded the
USA Today app, and the company boasts that it reaches more people digitally than Netflix,
CBSnews.com, the New York Times digital or WashingtonPost.com. Gannett generates healthy cash
flow, has considerable real estate assets that it is gradually monetizing, offers a large 7.7% dividend yield,
is repurchasing shares and has a reasonable debt load. The market seems to be missing the good news
on Gannett.

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John Buckingham
AFAM Capital

Kroger (KR)
Market Cap: $20.9 billion Revenue (ttm): $117.0 billion Yield: 2.1%

In mid-June, grocery stocks plunged after Kroger issued a disappointing first quarter earnings report
and news broke that Amazon had reached a deal to buy Whole Foods, making investors fearful that
supermarkets were the next area of the already-fragile retail sector to feel the intense competitive
pressure from the e-commerce titan. Certainly, competition has continued to intensify in the grocery
biz, but the difficult backdrop was already well understood and had largely been discounted in my view.
I also think that the last-mile of distribution remains the most challenging, and the purchase of stores
by an online retailer is a major nod to the difficulty that Amazon is having getting everything to a
shoppers doorstep. The number of failed home-delivery grocers is large, and I believe that plenty of
shoppers will prefer to pick out their own rations for a long time still. I see Krogers plunge as a buying
opportunity, given a forward P/E ratio around 14 and a yield above 2%.

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Jim Oberweis
Oberweis Asset Management

Tencent Holdings (TCEHY)

Market Cap: $399.9 billion Revenue (ttm): $25.1 billion
Net Income (ttm): $6.9 billion

Tencent Holdings owns the largest online social media platform in China. WeChat and QQ, with 938
million and 861 million monthly active users, respectively, are the two most important platforms it
operates there. And those users love games. Mobile and PC games contributed about 54% of Tencents total
revenueit has about 45% market share in China's online game industryin the first quarter of 2017.
Tencent also provides online advertising to its users, which contributes about 15% of revenues.
Growing revenues from gaming and online advertising are a great reason to own this Chinese juggernaut.

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