With earnings reporting for the second quarter all but over, and the summer starting to wind down, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market showing the potential for some sizable rotation, it makes sense to examine the lists and reposition as the rest of the year could have additional volatility, as the political and geopolitical cycle could prove to be very explosive components.

The research team at BofA Securities has made four changes to the firm’s US 1 list of top stocks to Buy. Two companies were removed and two new companies were added. The analysts also made changes to the weighting methodology and the committee process for the US 1 list during the most recent changes to the portfolio, so we have them again for review.

Going forward, the list will be weighted based on market capitalization and will allocate 2% for stocks with less than $100 billion market cap, 4% for stocks with $100 billion to $400 billion market cap, and 6% for any stocks with greater than $400 billion market cap. To the extent that any security selection causes the list allocation to exceed or fall short of 100%, this excess/shortfall will be allocated equally across all stocks in the list.

Here we cover the two new stocks that are added, and we also screened the US 1 list for three additional highest paying dividend stocks, as the two new additions also pay reliable dividends. While all five are outstanding ideas for investors, it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Northrop Grumman

The company was ranked as one of the top five defense contractors by sales last year, and it makes its debut on the US 1 list. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide. It is also one of the companies profiting most from war.

The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.

The Information Systems segment offers advanced solutions for Department of Defense, national intelligence and federal civilian, state, international and commercial customers. It provides products and services primarily in the fields of command and control, communications, cyber, air and missile defense, intelligence processing, civil security, health information technology, and government support systems.

The Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services, including space, missile defense, nuclear security, training and simulation services.

Shareholders receive a 1.70% dividend. The BofA Securities price target for the shares is $450, and the Wall Street consensus target is $391.94. Northrop Grumman stock closed trading on Tuesday at $341.85 a share.

TE Connectivity

This somewhat lesser-known stock was also added to the US 1 list. TE Connectivity Ltd. (NYSE: TEL) is the world’s largest maker of passive electronic components (75% of sales) led by a leading share (20% to 25%) in connectors (50% of sales). The company’s biggest served markets have longer cycles, such as auto (30% of sales) and telecom equipment (19% of sales). TE Connectivity also produces components for telecom and energy networks (14% of sales) that protect/connect cabling.

The BofA team feels that the company has significant potential long-term benefit from secular growth in the automobile industry. As original equipment manufacturers continue to add features to make vehicles safer, greener and more connected, TE Connectivity should benefit from content growth. Strong cash flow, share buybacks and dividends should continue to provide valuation support.

The company posted strong results last month and the analysts noted this:

Fiscal third quarter results and the fiscal fourth quarter outlook highlighted operating margin strength driven by portfolio transformation actions. Management expects fiscal fourth quarter revenues to grow 10% quarter over quarter driven primarily by vehicle production recovery, while industry/communications remain stable. We reiterate Buy as we see strong growth post COVID while the company should benefit from secular content growth over the long-term.

Shareholders receive a 2.02% dividend. BofA Securities has a $105 price objective, well above the $98.57 consensus target. TE Connectivity stock closed at $95.04 on Tuesday.

While lesser known than some other members of the US 1 list, this may be a perfect defensive stock to rotate to. Ameren Corp. (NYSE: AEE) operates as a public utility holding company in the United States engaged in the rate-regulated electric generation, transmission and distribution activities, as well as rate-regulated natural gas distribution and transmission businesses.

The company primarily generates electricity through coal, nuclear and natural gas, as well as renewable sources, such as hydroelectric, methane gas and solar. Ameren serves residential, commercial and industrial customers. It also serves approximately 1.2 million electric customers and approximately 130,000 natural gas customers in central and eastern Missouri.

The analyst said this about the very solid second-quarter results:

Ameren posted second quarter adjusted EPS of $0.98, compared to $0.72 in the second quarter of 2019, our estimate of $0.86, and Street consensus of $0.88. We stress the magnitude of the beat is notable and affirms our underlying confidence on shares. Reiterate Buy heading into key updates this Fall with latest integrated resource plan iteration. The company expects a gradual economic recovery in the third and fourth quarter to drive a rebound in retail sales to a year over year decline of 2.5%, for an anticipated earnings impact of – 5 cents in the second half of the year. Expectations of continued strong execution following constructive Missouri rate case order and looking ahead to the company’s Integrated Resource Plan filing in September which we expect will include detail on future coal retirement plans.

Shareholders receive a 2.44% dividend. The surprising $79 BofA Securities price target is less than the $81.80 consensus target. Ameren stock closed most recently at $81.16.

BlackRock

Many on Wall Street love this firm’s growth potential, especially for the long term, and it is a top financial in the US 1 list. BlackRock Inc. (NYSE: BLK) is the largest asset manager in the world, with more than $5 trillion in assets under management. Its acquisitions of Merrill Lynch Investment Management and iShares transformed it from a fixed income manager into a multiproduct and multichannel giant, with roughly 40% of its assets under management overseas. It has leading franchises in exchange-traded funds (ETFs), institutional fixed income, alternatives and cash. It also operates Solutions, a leader in risk analytics.

The company’s strong historical and prospective dividend growth is underpinned by the high-quality and diversified business model. Dividends have increased 18% annually over the past 10 years. Dividend growth likely will moderate but remains solid in the low teens, consistent with expectations for earnings growth in the years ahead.

Shareholders receive a 2.48% dividend. BofA Securities has set a stunning $675 price objective. The consensus target is lower at $643.27, and BlackRock stock closed at $586.64.

Equinix

This is one of the largest companies in its industry. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.

The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.

Investors are paid a 1.40% distribution. The BofA Securities target price is a towering $865 while the consensus price objective on Wall Street is posted at $812.74. The shares closed Tuesday at $758.17.

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The two companies removed from the US 1 list were, surprisingly, Raytheon Technologies Corp. (NYSE: RTX) and, not so surprising, L. Brands Inc. (NYSE: LB). Despite the removal, both remain rated Buy at BofA Securities.

These are five top stocks from the BofA Securities US 1 list that investors may want to consider rotating to from the overbought and very pricey tech sector and overall momentum growth arena. It is pretty clear that a defensive rotation has started, and with the market getting close to the seasonal weaker portion of the year, now may be a great time to take some profits and reset.

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