In this article, we discuss the 5 best bear market stocks to buy now. If you want to see more stocks in this selection, go directly to the 13 Best Bear Market Stocks To Buy Now.
5. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 97
Bank of America Corporation (NYSE:BAC) is a Charlotte, North Carolina-based diversified financial services company involved in consumer banking, investment banking, financial research, and related services.
The company is the second biggest holding in the portfolio of Berkshire Hathaway, only falling behind Apple Inc (NASDAQ:AAPL). The bank is expected to experience higher revenues due to the increasing benchmark interest rates. Furthermore, experts believe that some impact of the recession has already been incorporated into the stock price. Vivek Juneja at JPMorgan increased the price target on Bank of America Corporation (NYSE:BAC) from $35.5 to $39 and reiterated an Overweight rating on November 2. Bank of America Corporation (NYSE:BAC) offers an annual forward dividend yield of 2.38% as of November 30.
Artisan Partners shared its bullish outlook on Bank of America Corporation (NYSE:BAC) in its Q2 2022 investor letter. Here’s what the firm said:
“We made only one new purchase during the quarter, initiating a position in Bank of America (BAC). As one of America’s largest banks, Bank of America Corporation (NYSE:BAC) is second only to JPMorgan Chase (JPM) in size and is probably its closest peer. Both are well-run banks, but compared to JPM, since the GFC, BAC has retired more shares, grown EPS faster and currently has more capital and a lower dividend payout. We are attracted to BAC’s strong capital base, high capital generation capacity, large loan loss reserve, low (~50%) loan/deposit ratio, short duration investment securities book, and low dividend payout that provides financial flexibility. BAC has a less volatile earnings stream than JPM with lower capital market sensitive exposures. Additionally, BAC is rigorously stress tested by the Fed every year in quantitative and qualitative fashion. Warren Buffett’s Berkshire Hathaway, which we hold in the portfolio, owns 12% of BAC. He petitioned the Fed to own more than 10%, so he clearly likes it. Bank stocks were strong gainers in 2021 on the prospects of higher rates boosting net interest margins, but the stocks pulled back in the first half of 2022 on economic concerns. We believe BAC has massive scale advantages, should benefit from increasing interest rates, particularly in the 2-year part of the yield curve, and should grow over time with the economy. The economic environment is highly uncertain, but current consensus includes the provision for losses more than doubling and capital markets activity slowing. Against that backdrop, our purchase price equated to about 8.5X our estimates of “mid-cycle” earnings. With leading businesses, a double-digit ROE, a prudent capital return strategy and a strong balance sheet, we believe this entry point offered a solid long-term value.”
