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BofA Securities Out With Top 10 Stock Ideas for Q1 2021
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As incredible as it may seem, 2021 is already here, the holidays are over and everybody finally has returned to Wall Street for what could be a very different year for investors, compared with the roller-coaster ride we took last year. Interest rates are expected to stay at generational lows, and with more stimulus headed out from Washington, D.C., that may help backstop struggling U.S. businesses and consumers.
A new BofA Securities research report is among the first out with top ideas for the first quarter of 2021. They 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 stock picks for growth accounts.
Note that the two stocks the analysts rate as Underperform are Hexcel Corp. (NYSE: HXL) and Iron Mountain Inc. (NYSE: IRM). More aggressive investors may want to consider these ideas as possible short sale candidates for the first quarter.
Citigroup
This top bank has had a nice run off the 2020 lows but still has plenty of upside, and it is on the BofA Securities US 1 list. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.
Trading at a still very cheap 9.9 times estimated 2021 earnings, Citigroup stock looks very reasonable in what remains a volatile market and in a sector that has lagged dramatically over the past year.
Citigroup investors receive a sizable 3.39% dividend. BofA Securities has a $79 price target on the shares. The Wall Street consensus price objective is $69.98. Citigroup stock traded at $60.70 Tuesday morning.
Foot Locker
This athletic shoe retailer has rallied from lows and looks ready to move higher. Foot Locker Inc. (NYSE: FL) is an athletic footwear and apparel retailer in North America, Europe and Asia. The company’s banners include Foot Locker, Champs Sports, FootAction, Kids Foot Locker, Lady Foot Locker, SIX:02 and Eastbay.
Many Wall Street analysts feel that consumers are bearing price increases from the top companies like Nike, Reebok and Adidas. They also say that currently athletic apparel and footwear companies are continuing to see higher gross margins and return on invested capital, which some think will be a source of multiple expansion.
Foot Locker stock investors receive a 1.53% dividend. The BofA Securities price target is $55, and the consensus price target is lower at $42.95 The shares traded early Monday at $39.80.
24/7 Wall St.Kansas City Southern
This top railroad stock could have a very solid 2021 with an improving economy. Kansas City Southern Inc. (NYSE: KSU) is a Class 1 North American railroad, with a nearly 6,000-track mile network, serving 10 states in the central and south-central United States, as well as Mexico.
With a network spanning across the U.S./Mexico border through Laredo, Texas, the company provides a direct connection between the United States and the industrial centers of Mexico. The company’s Mexican operating subsidiary, Kansas Southern de Mexico, is one of the two largest primary Mexican rail carriers.
The company is expected to generate $500 million in free cash flow for 2020, and analysts expect strong operating leverage potential as volumes start to rebound with an improving economy.
Shareholders receive just a 0.88% dividend. The $228 BofA Securities price objective compares to the $201.16 consensus target. Kansas City Southern stock traded at $202.65 on Monday.
Occidental Petroleum
This energy company made huge news with a Warren Buffett backed purchase of Anadarko Petroleum. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals.
The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
The shares have underperformed since the Anadarko acquisition was announced and after the company essentially eliminated the dividend. However, the stock remains a solid idea for investors looking to add energy to portfolios.
BofA Securities has a gigantic $29 price objective, while the consensus price objective is a dramatically lower $16.14. Occidental Petroleum was trading at $18.30 per share.
Raytheon Technologies
This stock is down a stunning 20% from this time last year, and it offers perhaps the best value in the defense and aerospace sector. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.
With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.
In 2019, United Technologies and Raytheon agreed to merge their businesses to create a new aerospace and defense powerhouse. The two companies received unanimous approval from their respective boards, and the merger is finally complete, with the new company now called Raytheon Technologies.
Shareholders receive a 2.78% dividend. The BofA Securities price objective is $91. The $80.71 consensus target price for Raytheon Technologies stock is also well above the recent share price of $69.25.
ServiceNow
This stock had an incredible 2020 and remains a top pick. ServiceNow Inc. (NYSE: NOW) develops and sells a hosted, subscription-based suite of services designed to automate various IT department functions, such as help desk, operations management and change/release management.
The company also sells a number of applications that automate various self-service related applications outside of the IT department, such as HR onboarding, facilities requests and governance, risk and compliance.
BofA Securities has set a massive $650 price objective, which towers above the $560.77 consensus price target. Service Now stock recently traded at $530.20.
Tapestry
This retail idea offers some serious total return upside potential as a contrarian play. Tapestry Inc. (NYSE: TPR) is a leading specialty retailer positioned in an appealing segment of the market (affordable luxury). Tapestry’s brands include Coach, Kate Spade and Stuart Weitzman, and the company is best known for accessories (especially handbags).
The company’s products are primarily sold through retail stores, outlet stores and online. The brands have a strong presence in select department stores and specialty retailer locations.
The $40 BofA Securities price target is well above the consensus target of $30.30. Tapestry stock traded at $32.50 on Monday.
24/7 Wall St.T-Mobile
This company finally completed a long and arduous pursuit of former rival communication company Sprint. T-Mobile US Inc. (NASDAQ: TMUS) provides wireless services for branded postpaid, prepaid and wholesale customers in the United States, Puerto Rico and the United States Virgin Islands.
The company offers voice, messaging and data services. It also provides wireless devices, including smartphones, wearables, tablets and other mobile communication devices, as well as accessories and wireline services. It offers its services under the T-Mobile, Metro by T-Mobile and Sprint brands.
The combination with Sprint could bring about a seismic shift in the mobile world. T-Mobile and Sprint’s combined assets could jump-start their 5G ambitions, pushing the industry further into the next-generation technology. They’ve also said they’ll lock in consumer prices for at least three years. As part of all the wrangling, Dish Network will become the fourth national carrier, giving consumers a new alternative.
BofA Securities has a $155 price objective. The consensus target is $151.04, and T-Mobile stock changed hands at $131.65 recently.
These are eight great stock ideas for the first quarter of 2021, along with two potential short sale ideas. The long picks make good sense for growth investors looking to perhaps take some profit and move to new positions.
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