S&P 500 Beaters? Bank Of America Names Top 11 Stock Picks For 2021

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Bank of America (BAC) this week unveiled its top stocks for next year among the 11 S&P 500 sectors. But the bank might hope its picks do better than they did in 2020.


The $250 billion bank highlighted stocks it thinks will outperform in all the sectors. Three of BofA’s 11 picks, consumer staples Walmart (WMT), materials firm Vale (VALE) and utility NextEra Energy (NEE) are already beating both the S&P 500 and their sectors this year, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Vale carries a strong 95 IBD Composite Rating.

The rest, though, are laggards. BofA seems to be betting 2021 is a year for left-behind stocks to catch up. Airline Alaska Air (ALK) is down 26% this year. That means its stock this year trails the S&P 500’s 15.6% gain by a whopping 41 percentage points. But it’s also 35 percentage points behind the Industrial Select Sector SPDR’s (XLI) 9% gain this year. BofA didn’t choose a single big-cap technology-related S&P 500 stock.

“These stocks align with themes in our 2021 year ahead,” according to the report. Those themes are value stocks over growth, small stocks over large ones, cyclical stocks over defensive plus ESG.

Analysts Agree With Three BofA S&P 500 Picks

Wall Street analysts don’t share BofA’s bullishness on most of its favorite stocks. But they do agree on three of them.

Energy firm Chevron (CVX), financial Allstate (ALL) and real estate Realty Income (O) are the only S&P 500 stocks that BofA’s analysts think will gain 10% or more in 2021.

Highest hopes are for Chevron. Analysts think the energy stock will be worth 101.90 in 12 months. If that’s correct, that would be nearly 16% implied upside.

BofA, in its report, heralded Chevron’s size putting it in position to win if investors rotate back into value stocks. They also applauded the company’s stable cash flow. After losing an estimated $4.7 billion in 2020, analysts think Chevron will make $4.4 billion in 2021. What should you know before you buy Chevron stock?

Allstate is another stock that S&P 500 analysts agree with BofA on. Analysts think the stock, which dropped nearly 6% this year, will rally nearly 12% in the next 12 months. BofA holds the company out for its high ESG score and high quality. Street analysts also think Allstate’s profit per share will jump 19% in 2020.

BofA’s Top Stock Picks For 2021

Company Symbol YTD Gain Upside To Street Price Target* Sector Composite Rating
Walt Disney (DIS) 19.9% -0.8% Communication Services 45
Hilton Worldwide (HLT) -5.5% -1.9% Consumer Discretionary 45
Walmart (WMT) 22.9% 9.7% Consumer Staples 57
Chevron (CVX) -26.8% 15.6% Energy 14
Allstate (ALL) -5.2% 11.1% Financials 63
HCA Healthcare (HCA) 11.8% -1.7% Health Care 90
Alaska Air Group (ALK) -26.3% 7.2% Industrials 36
Qorvo (QRVO) 37.1% 2.8% Information Technology 95
Vale (VALE) 30.6% 5.1% Materials 95
Realty Income (O) -17.2% 12.5% Real Estate 22
NextEra Energy (NEE) 24.2% 4.9% Utilities 52
Sources: BofA, S&P Global Market Intelligence, * based on 12-month Wall Street target

2020 A Rough Year For BofA’s Picks

It’s understandable investors might be skeptical of BofA’s picks. The bank largely whiffed this year. But to its credit, it issued its own mea culpa and published its misses.

In fact, all 11 of BofA’s top stock picks of 2020 lagged their sectors. And some by quite a bit. In a year where technology shot the lights out, BofA’s pick in the sector was dog Intel (INTC), which dropped 16% in 2020. That means it lagged the Technology Select Sector SPDR (XLK) by a brutal 56 percentage points, when the sector ETF shot up 40%. Much better to stick with leading stocks, if you want to make money.

BofA also chose Exxon Mobil (XOM) as its top energy pick in 2020. It’s hard to think of many companies that have suffered more in 2020. It lagged the abysmal 33% drop in the Energy Select Sector SPDR (XLE) by four percentage points. And it suffered the indignity of getting tossed out of the Dow Jones Industrial Average, too.

Meanwhile, the only BofA stock pick for 2020 to beat the S&P 500 is Disney (DIS). In a year of pandemic theme park closures, the stock gained nearly 20%. And that might explain why Disney is the only 2020 BofA pick to land on its top list for 2021, too.

Hopefully, a second try for BofA’s picks will be the charm.

Most BofA’s Top Stock Picks For 2020 Whiffed

Company Symbol YTD Gain Sector % Ch. Difference From S&P 500 Sector (YTD) YTD % Ch. Difference From S&P 500
Walt Disney (DIS) 20.0% Communication Services -5.1% 4.3%
CarMax (KMX) 13.8% Consumer Discretionary -14.4% -1.8%
Tyson Foods (TSN) -28.6% Consumer Staples -36.2% -44.2%
Exxon Mobil (XOM) -37.7% Energy -4.4% -53.3%
Citigroup (C) -24.8% Financials -18.2% -40.5%
Dentsply Sirona (XRAY) -5.9% Health Care -16.7% -21.5%
Raytheon* (RTN) -58.7% Industrials n/a n/a
Intel (INTC) -15.4% Information Technology -55.7% -31.0%
WestRock (WRK) 4.8% Materials -12.2% -10.8%
Kimco Realty (KIM) -27.2% Real Estate -23.1% -42.9%
American Electric Power (AEP) -11.3% Utilities -8.5% -26.9%
Sources: BofA, S&P Global Market Intelligence, * acquired

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