On a down day for major market averages, Paul Hickey, co-founder of Bespoke Investment Group, and Phil Camporeale, portfolio manager at JP Morgan Asset Management, discussed the ongoing volatility. They both appeared on CNBC's 'Closing Bell Overtime' on March 5 to talk about how tariff policy raises uncertainty around growth and earnings outlook.
Camporeale highlighted the difficulty of navigating the rapid pace of headlines surrounding trade discussions out of Washington. Entering the year with a 10% equity overweight, JP Morgan has since reduced this to 5%, reallocating some exposure to US, developed non-US, and emerging markets. Camporeale noted that while policy uncertainty raises questions about growth and earnings outlooks, the US economy remains strong, with a 4% unemployment rate, 3% GDP growth, and solid corporate balance sheets. He said that despite short-term market turbulence, recession risks remain low, and their portfolio maintains an equity overweight alongside high-yield exposure. He also pointed out that it is still early in President Trump's second term and too soon to draw definitive conclusions about its impact. He believes that lower interest rates could pave the way for positive fiscal and deregulation policies that have yet to fully materialize. Despite current market fears, he remains optimistic about the economy’s strength and low recession probability.
Hickey weighed in on the uncertainty dominating markets, emphasizing that no one can predict the full impact of tariffs. He referenced Target CEO Brian Cornell’s comments earlier in the day about the lack of certainty regarding tariffs, taxes, rates, and the economy. Hickey remarked that this stew of uncertainty is keeping investors cautious. He noted that intraday rallies, such as the one seen earlier in the day after bouncing off the 200-day moving average, are often short-lived due to unpredictable policy developments. For instance, Trump’s speeches have recently been followed by market declines, adding to investor hesitancy. He also highlighted historical context for pullbacks like the current one: since World War II, there have been 64 instances of a 5% drop from all-time highs in the S&P 500. While not uncommon, he advised caution in the short term due to unpredictable market reactions.
Both experts agreed that uncertainty around tariffs and other policies will continue influencing market behavior in the near term. However, they emphasized different aspects, Camporeale focused on economic strength and strategic positioning within portfolios, while Hickey stressed caution amid ongoing unpredictability in policy-driven market movements.
Methodology
We used the Finviz stock screener to compile a list of the top US stocks that had a forward P/E ratio under 15. We then selected the 10 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 Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Bank of America Corporation (BAC) the Best Holding Company Stock to Buy Right Now?
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Bank of America Corporation (NYSE:BAC) is a global financial services provider that delivers a range of banking, investment, and risk management solutions to individuals, businesses, and institutions worldwide. It operates through its 4 core segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets.
Its Consumer Banking segment contributed ~$11 billion to the company's total 2024 revenue. This was 40% of the company's earnings. Q4 2024 revenue for this segment was $10.6 billion. The segment added over 200,000 net new checking accounts and marked six years of growth. Investment balances reached $518 billion, with $25 billion in full-year flows. Deposits stabilized, ending at $952 billion, with average deposits up $4 billion from Q3, while the rate paid declined to 0.64%.
Digital engagement at Bank of America Corporation (NYSE:BAC) was strong, with over 14 billion digital logins in 2024. Digital sales crossed 60% in Q4 2024, and the Erica capability surpassed 2.5 billion interactions. Erica capabilities encompass its AI-powered ability to interact with customers, provide financial information, and perform banking tasks through the Bank of America app. The company now plans continued investment and expects growth in loans and deposits.
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 1st on our list of the most undervalued US stocks to buy according to hedge funds. 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 time frame. 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.
