Bank of America's 8 Best Stocks to Buy in Q4
Analysts say these are the best stocks to buy in the fourth quarter.
After a brutal first quarter of 2020, the S&P 500 heated up in the second and third quarters. Investors shrugged and drove the stock market to an all-time high in the third quarter in hopes that the economic recovery will pick up. The fourth quarter will be filled with uncertainties about the elections, the health crisis, and the economy. However, Bank of America recently released its list of the top eight stocks to buy in the fourth quarter. These eight stocks are compelling ideas whose market-moving catalysts will come before the end of the year.
Additional storage space (EXR)
According to analyst Jeffrey Spector, self-storage real estate investment trust Extra Space Storage is well positioned to outperform in the final months of 2020. According to Spector, self-storage is a defensive business in times of economic uncertainty. An increase in the number of Americans moving due to changing work environments will continue to be a bullish catalyst for Extra Space. According to Spector, operations have largely returned to normal after the downturn in early 2020. Finally, Extra Space pays a dividend of 3.2%. Bank of America has a buy rating and a price target of $ 129 on EXR stock.
Freeport-McMoRan is the world's largest public copper and molybdenum producer and owns the world's largest gold mine in Grasberg, Indonesia. The price of gold rose more than 22% in 2020, partly due to inflation concerns from the Federal Reserve's massive stimulus programs. Analyst Timna Tanners says she is bullish on both copper and gold prices, which could push earnings up for Freeport if the company reports third-quarter earnings in late October. Unfortunately, management has announced that it will not reinstate the suspended dividend until 2021. Bank of America has a buy rating and a target price of $ 19 on FCX shares.
Alphabet (togetL, toget)
Google parent company Alphabet was the worst-performing FAANG stock in 2020. In fact, Alphabet saw its first negative revenue growth in its history in the second quarter. Search advertising is likely to recover faster than investors anticipated, according to analyst Justin Post, and Waymo's subscription services, cloud business, and the self-driving segment of Waymo will benefit from the health crisis in the long term. The Post said it is at risk of Justice Department antitrust proceedings against Google, but any clarity on the situation could actually boost the stock. Bank of America has a buy rating and a target price of $ 1,850 on togetL stock.
Jazz Pharmaceuticals (JAZZ)
According to analyst Jason Gerberry, specialty drug maker Jazz Pharmaceuticals has several growth drivers in the pipeline that will help the company diversify from its legacy core drug sodium oxybate. With Jazz facing competition for generic sodium oxybate in 2023, its ability to diversify will be key to increasing the stock's earnings multiple, Gerberry says. In the fourth quarter, Jazz will release Phase 3 Xywav data for patients with idiopathic hypersomnia, a market that Gerberry estimates could peak sales of up to $ 650 million for Jazz. Bank of America has a buy rating and a target price of $ 166 on JAZZ stock.
Eli Lilly & Co. (LLY)
According to analyst Geoff Meacham, drug company Eli Lilly has a better growth profile than its peers, including projected average annual sales growth of 8% and middle-teens earnings per share for the next five years. Meacham says Eli Lilly is one of the highest quality stocks it covers due to its diversified growth drivers including oncology and diabetes. Eli Lilly is expected to publish phase 3 data on the diabetes drug Tirzepatid in the fourth quarter. Meacham said the short-term drug price risk is already priced into the stock. Bank of America has a buy rating and a price target of $ 180 on LLY shares.
Medtronic is a medical device company. According to analyst Bob Hopkins, Medtronic is reasonably rated and well positioned to exceed Wall Street expectations in the short term. Hopkins said the company's Analyst Day on October 14 should help allay investor skepticism after the company has failed to live up to expectations for the past five years. Medtronic has a new CEO who is addressing previous issues by aggressively changing the company's operational structure. After the analyst day, Medtronic will report a quarterly profit in November. Bank of America has a buy rating and a target price of $ 130 on MDT stock.
Parker-Hannifin Corp. (PH)
Parker-Hannifin is a supplier of industrial hydraulics, motion and fluid control systems and components. According to analyst Andrew Obin, investors do not fully appreciate the company's operational improvements. Parker-Hannifin's earnings were less cyclical in the 2020 downturn than other high quality industrials. Parker-Hannifin reports profits in early November, and Obin forecasts a significant jump in profits with better-than-expected margins. In addition, Obin says any economic data pointing to a recovery in industrial activity should be a bullish catalyst for the stock. Bank of America has a buy rating and a price target of $ 265 on PH shares.
While other retailers struggled in 2020, Walmart has gained market share, spiked growth numbers and significantly outperformed the S&P 500. According to analyst Robert Ohmes, the health crisis has accelerated Walmart's omnichannel strategy and the equity gains of brick and mortar competitors. According to Ohmes, the Walmart + subscription service is set to help the company better monetize its fast-growing digital traffic and 160 million weekly customers. The short-term catalysts include the results of the third quarter in mid-November and the proposal to acquire a minority stake in the social media platform TikTok. Bank of America has a buy rating and a target price of $ 175 on WMT stock.
Stocks Recommended by Bank of America:
- Additional storage space (EXR)
- Freeport-McMoRan (FCX)
- Alphabet (togetL, toget)
- Jazz Pharmaceuticals (JAZZ)
- Eli Lilly & Co. (LLY)
- Medtronic (MDT)
- Parker-Hannifin Corp. (PH)
- Walmart (WMT)
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