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BofA Securities Top 10 US Stock Ideas for the Rest of 2021
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It is almost hard to believe, in what has been one of the most unbelievable years in recent history, that Halloween is this weekend and Thanksgiving is right around the corner. Overall, the third quarter of 2020 produced the second consecutive quarter of notable market gains. Of the benchmark indexes, the Nasdaq again proved the strongest, climbing more than 11% for the quarter, followed by the large caps of the S&P 500 and the Dow Jones industrial average, which gained 8.5% and 7.6%, respectively.
In a new research report from BofA Securities, they are out with their top ideas for the rest of 2021, and they recapped what was an outstanding third-quarter performance for the group. The report noted this when discussing the extremely strong results:
Our US Top 10 Ideas returned 14.28% in the third quarter and compares to a 5.97% return for the HFRXNA Index; 8.31% of outperformance. For the trailing 12-months the Top US 10 returned 23.51%, while the HFRXNA returned 5.41%, an 18.10% outperformance.
The analysts have eight stocks to buy and two that are expected to underperform. Here we focus on the long ideas, and at first glance, they look like outstanding additions for growth stock investors. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas such as search, advertising, operating systems and platforms, and enterprise and hardware products. The company generates revenue primarily by delivering online advertising and by selling apps and content on Google Play, as well as hardware products. Alphabet provides its products and services in more than 100 languages and in 190 countries, regions and territories.
The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as search, ads, commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The analysts point to Google Cloud, which is the largest cloud infrastructure play and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
The BofA Securities price target for the stock is a stunning $1,850. The Wall Street consensus target is $1,758.61, and Alphabet stock closed Tuesday at $1598.88 a share.
Eli Lilly
This pharmaceutical giant offers solid upside potential and is a great pick for conservative investors. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
In July, Eli Lilly raised its full-year profit forecast after increased demand for its Trulicity diabetes drug helped it beat second-quarter profit expectations. The company raised its 2020 adjusted earnings forecast to between $7.20 and $7.40 per share, from its prior range of $6.70 to $6.90 per share.
Shareholders receive a 2.24% dividend. BofA Securities has a $180 price objective, while the consensus target is $165.07. Eli Lilly stock was last seen trading at $131.90.
24/7 Wall St.Extra Space Storage
This top real estate investment trust (REIT) has solid total return potential. Extra Space Storage Inc. (NYSE: EXR) is a fully integrated, self-administered and self-managed REIT headquartered in Salt Lake City, Utah. Like many self-storage companies, Extra Space offers rentable storage space offering customers conveniently located and secure storage units across the country, including boat storage, recreational vehicle storage and business storage.
As of the second quarter of 2020, the company owned or operated 1,878 self-storage stores in 40 states, Washington, D.C., and Puerto Rico. The portfolio consists of approximately 145.4 million square feet of rentable space and 1.4 million units, making the company the second-largest owner/operator of self-storage stores and the largest self-storage management company in the United States.
Unitholders receive a 3.07% distribution. The BofA Securities price target is $134, while the consensus target is $109.77. Extra Space Storage stock closed at $117.09 on Tuesday.
Freeport-McMoRan
This remains a compelling value at current trading levels, and it is one of the top picks at BofA Securities in the sector. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and molybdenum producer, and the eighth largest gold producer. Its key operating and development assets are in Indonesia, North and South America, and Africa.
Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects and would clearly benefit from stronger demand and higher prices for industrial commodities.
The $21 BofA Securities price target compares with an $18.22 consensus price target and the most recent close for Freeport-McMoRan stock at $17.72.
Jazz Pharmaceuticals
This health care leader was a recent addition to the firm’s US 1 list. Jazz Pharmaceuticals PLC (NASDAQ: JAZZ) is a biopharmaceutical company that identifies, develops and commercializes pharmaceutical products for various medical needs in the United States, Europe and elsewhere.
The company has a portfolio of products and product candidates with a focus in the areas of sleep and hematology/oncology. Its largest products are Xyrem for narcolepsy (excessive daytime sleepiness), followed by Erwinaze for acute lymphoblastic leukemia and Defitelio for veno-occlusive disorder (blockage of blood vessels in liver).
BofA Securities has set a $178 price target. The consensus figure is $169.94, and Tuesday’s closing print for Jazz Pharmaceuticals stock was $149.56.
24/7 Wall St.Medtronic
This medical technology giant is a solid pick for investors looking for a safe position in the health care sector. Medtronic PLC (NYSE: MDT) develops, manufactures, distributes and sells device-based medical therapies to hospitals, physicians, clinicians and patients worldwide.
The company announced earlier this summer that Blackstone’s life sciences division would invest $337 million into the research and development of its diabetes device technologies. Under the terms of the agreement, Medtronic will receive funding for four diabetes programs over the next several years. Medtronic’s engineering, clinical and regulatory teams will conduct the development work for the programs.
Medtronic stock investors receive a 2.21% dividend. The BofA Securities price target is $130, and the consensus price target is $117.17. Shares closed at $105.21 on Tuesday.
Parker-Hannifin
This top industrial company looks poised for a solid 2021 and beyond. Parker-Hannifin Inc. (NYSE: PH) manufactures and sells motion and control technologies and systems for various mobile, industrial and aerospace markets worldwide.
The Diversified Industrial segment provides pneumatic, fluidic and electromechanical components and systems, as well as filters, systems and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water and other liquids and gases.
The Aerospace Systems segment offers flight control, hydraulic, fuel, fluid conveyance and engine systems and components for commercial and military airframe and engine programs. It also provides electronics thermal management heat rejection systems and single-phase and two-phase heat collection systems for radar, inverse synthetic aperture radar and power electronics.
Shareholders receive a 1.66% dividend. The $265 BofA Securities is well above the consensus price target of $230.72. Tuesday’s last trade for Parker-Hannifin stock hit the tape at $211.76.
Walmart
Shares of this giant retailer have rallied nicely off levels posted in March but still offer solid upside. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States, as well as a growing e-commerce business. Internationally Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.
Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. With fiscal year 2019 revenue of $514.4 billion, Walmart employs approximately 2.2 million associates worldwide.
Shareholders receive a 1.54% dividend. The BofA Securities price target is $175. The posted consensus target is $147.36. Walmart stock closed at $142.76 a share.
The two stocks that the analysts rate as Underperform are Royal Caribbean Group (NYSE: RCL) and Waters Corp. (NYSE: WAT). More aggressive investors may want to consider these ideas as possible short sale candidates for the rest of the fourth quarter.
These are eight top long ideas and two potential shorts for more aggressive investors. We will track the progress on these picks and keep 24/7 readers up to date on their performance.
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