Bank of America Corp. (BAC) Positioned for Growth with Diverse Revenue Streams and Technology Focus
We recently published a list of 8 Best Inexpensive Stocks To Invest In Now. In this article, we are going to take a look at where Bank of America Corp. (NYSE:BAC) stands against the other best inexpensive stocks to invest in now.
Are Experts Already Looking Into 2025?
The recent market surge has raised concerns about potential market overvaluation. While the market has experienced significant gains, there are growing concerns about the allocation of capital and the potential for inflationary pressures. The market has witnessed a significant upward trend following the Fed’s rate cut, with major indices reaching new all-time highs. This surge reflects a combination of factors, including increased investor confidence and optimism about the economic outlook.
Investors are advised to carefully consider their investment strategies amidst the current market dynamics. While small-cap stocks offer potential growth opportunities, it is crucial to evaluate the broader market trends and potential risks. By understanding the market dynamics, investors can navigate the current landscape and make informed decisions to achieve their financial goals.
On top of economic uncertainty, the upcoming elections also drive analysts to become overly cautious as the market becomes more volatile in the short term due to confused investor sentiments. Tom Lee, Fundstrat Global Advisors managing partner and head of research recently appeared on CNBC and recommended investing in small-cap stocks and equities over bonds, as they offer better growth potential, as long as the election uncertainty remains. We went over his opinion in greater detail in our article about the 10 Best Young Stocks To Buy Now, here’s an excerpt from it:
“….Tom Lee explained that the Fed’s actions have initiated an easing cycle, which historically tends to yield positive outcomes for the market 3-6 months down the line. However, he cautioned that stock performance in the immediate future remains uncertain due to ongoing repositioning ahead of the upcoming election in 40 days.
….He noted that many wealth managers and family offices are hesitant to commit capital until after Election Day, preferring to wait until that event is behind them. He expressed optimism about a potential surge in stock prices following the election, stating that November and December typically see strong rallies in election years, especially when markets have already gained more than 10% in the first half of the year.
….He highlighted an upcoming Core Personal Consumption Expenditures (PCE) report expected on Friday, which could confirm that inflation is no longer a pressing concern…Regarding a comment on recent target adjustments for the S&P 500, mentioning Brian Belski’s increase of his target to the highest on Wall Street, Lee acknowledged the potential upside in the next 3-6 months, expressing skepticism about setting aggressive targets like 6,000 for the S&P 500 at this time due to current valuations not being particularly low and having already experienced significant gains.”
As more and more analysts suggest space for further rate cuts, Vance Howard, CEO and Portfolio Manager at Howard Capital Management predicts a rate cut in early 2025 due to falling inflation and historical trends.
Appearing on CNBC on September 25, Vance Howard discussed the outlook for the market and the economy as we approach Q1 2025. He confidently stated that another significant rate cut is likely, driven by data indicating a need for it, particularly as inflation begins to decline. Howard pointed out that historically, after the first rate cut, markets tend to rise, with a perfect record of being higher 7 out of 7 times following such cuts. He also noted that if the S&P 500 has already gained 10% in the first half of the year, there is an 83% chance of continued upward movement in the second half. Therefore, he advised investors to remain optimistic and not be overly distracted by current market noise.
When asked about strategies for setting up portfolios in light of potential market volatility, Howard emphasized the importance of focusing on certain sectors. He highlighted utilities and real estate as promising areas, benefiting from falling interest rates. Howard expressed that reaching an all-time high in the market is a strong bullish signal and encouraged investors to buy on pullbacks.
Regarding specific sectors to watch, Howard identified financials as likely to strengthen following rate cuts. He explained that while financial stocks might initially dip after a rate cut, they typically rebound and continue to rise. Furthermore, he recommended staying invested in technology stocks.
Howard’s insights could potentially help investors navigate through potential market changes heading into 2025. By focusing on resilient sectors like utilities, real estate, and technology while considering strategic investments in convertible bonds and financials, investors may position themselves well for future gains.
Methodology
We used the Finviz stock screener to compile a list of 20 stocks with a forward P/E ratio under 20. We then selected the 8 best inexpensive stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Bank of America Corp. (NYSE:BAC)
Forward Price-to-Earnings Ratio: 10.95
Market Cap as of September 26: $304.52 billion
Number of Hedge Fund Holders: 92
Bank of America Corp. (NYSE:BAC) is a multinational investment bank and financial services holding company that offers a range of banking products and services, including commercial banking, retail banking, wealth management, investment banking, and global markets. It is one of the largest banks in the US and operates in several countries around the world.
This is a leading US financial institution with 69 million customers, 3,800 retail locations, and 15,000 ATMs. It added 278,000 new checking accounts in Q2 2024, bringing its 2024 total to 500,000. Wealth management added 6,100 new relationships and commercial banking added thousands of small businesses. Bank of America Corp. (NYSE:BAC) manages $5.7 trillion in client balances.
The company reported strong Q2 2024 earnings, driven by higher interest rates. While rising deposit costs impacted consumer banking, its diversified revenue streams mitigated these pressures. The investment banking and capital markets division performed well despite challenging market conditions. The bank’s focus on technology and digital banking enhances customer experience and drives efficiencies.
Overall, revenue for the second quarter was $25.38 billion, up 0.71% year-over-year. Fees grew 6% year-over-year and represented 46% of total revenue. Car and Service charge revenue grew by 6%. 87% of global banking clients also are digitally active. This is especially important because in the second quarter, digital sales represented 53% of the total sales.
This company presents a compelling investment opportunity. Its strong financial performance, coupled with a diversified revenue stream and strategic initiatives, positions it for continued growth. As the economy expands, the bank is poised to benefit from increased credit card spending, loans, and business borrowing.
Diamond Hill Large Cap Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its Q2 2024 investor letter:
“Other top contributors in Q2 included Bank of America Corporation (NYSE:BAC) and Extra Space Storage. Shares of financial services company Bank of America rose in the quarter as it looks increasingly likely net interest income will inflect and begin growing again in 2024’s back half and into 2025.”
Overall BAC ranks 3rd on our list of best inexpensive stocks to invest in now. While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.