We recently published a list of 10 Most Promising Low-Cost Stocks According to Hedge Funds. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against other most promising low-cost stocks.
Inflation Data Hints at a Lower Than 50 bps Cut
The September Consumer Price Index data showed that consumer prices rose way above expectations. On October 10, Omair Sharif, Inflation Insights president, appeared in an interview on Yahoo Finance to discuss his market thesis amid rising consumer prices.
Sharif highlights that while inflation data is higher than expected housing inflation has started to cool down a bit more. He also adds that food prices have come down significantly ever since the outburst after COVID-19, hinting that there are a lot of positives to extract from the current market situation.
Sharif suggests that the market is not up to a point where the Fed will be worried about the status quo, wiping out any hopes for a 50 basis point cut in November. His market thesis is that a 25 basis point cut in November will be the best course of action.
The Bull Market is Turning Two Years Old
As the Street approaches the second anniversary of the bull market, the market is set up for major changes. On October 11, Matthew Palazzolo, Bernstein Private Wealth Management’s senior investment strategist, appeared in an interview on Yahoo Finance to discuss the market outlook.
Palazzolo suggests that the Fed’s monetary policy is probably the biggest risk to the bull market at the moment. He adds that the Fed will continue to cut rates in 2025. While returns are expected to be modest the scenario is expected to be fairly conducive for equity investors.
He adds that the market is expected to broaden out from the magnificent seven and their valuations will increase relatively slowly. Palazzolo highlights that low-cost names will offer greater opportunity. He also suggests that companies beyond the big seven are more in line with their long-term average.
Our Methodology
To find the most promising low-cost stocks according to hedge funds, we used the Finviz stock screener. We set the Forward P/E under 15 to get a list of cheap stocks with a market capitalization of over $2 billion. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024 as a primary metric and their Forward P/E as of October 13, as a secondary metric.
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 Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 92
Forward P/E Ratio as of October 13, 2024: 13.12
Bank of America Corporation (NYSE:BAC) is a financial services company that provides investment and wealth management services to individuals, institutions, small to medium-sized businesses, large corporations, and the government. Some of its subsidiaries include Merrill, BofA Securities, and Bank of America Private Bank.
The company has over 3,800 retail locations and 15,000 ATMs across the United States servicing a large clientele of 69 million individual customers. Bank of America now manages $5.7 trillion in client balances, loans, deposits, and investments in its consumer and wealth management segments.
On August 12, Yahoo Finance shared Wolfe Research’s bullish stance on Bank of America Corporation (NYSE:BAC). The stock is a top pick for the firm and has more room to grow despite an aggressive easing cycle by the Fed. According to the firm, the setup for the leading retail banking services provider is constructive.
Bank of America Corporation (NYSE:BAC) is one of the best long-cost stocks according to hedge funds and we say that because of its strong ecosystem and client network. According to the Insider Monkey database, at the end of Q2, 92 hedge funds were bullish on the stock.
ClearBridge Investments’ ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
Overall, BAC ranks 4th on our list of most promising low-cost stocks according to hedge funds. While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher 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.
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Disclosure: None. This article is originally published at Insider Monkey.
