We recently compiled a list of the 15 Best Cheap Stocks to Buy for 2025. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against other best cheap stocks to buy for 2025.
The U.S. consumer prices report released this week revealed a less-than-expected increase in December, signaling a potential cooling in inflation pressures. This data has sparked bets on further tame inflation and a drop in interest rates. The core consumer price index (CPI), which excludes volatile food and energy prices, increased by 0.2%, down from 0.3% over the previous four months. This marks the first decrease in the rate of core CPI growth in six months, driven by lower hotel prices, slower increases in medical care costs, and moderate rent growth.
The data has renewed hopes that the Federal Reserve might ease interest rates sooner than anticipated. Before the report, most market participants expected rate cuts to occur in the second half of the year, if at all. However, the latest data has bolstered expectations for two cuts this year and even the possibility of a rate cut as early as March. Following the release, Treasury yields dropped, the S&P 500 rose, and the dollar weakened.
The sharp surge in equity prices is not surprising, as lower interest rates are generally bullish for several reasons. When interest rates fall, borrowing becomes cheaper for companies, which can lead to increased investment and expansion. Stock prices are often valued based on the present value of future earnings or cash flows, discounted by interest rates. Lower interest rates reduce the discount rate, increase the present value of future earnings, and make stocks appear more valuable.
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In an interview with CNBC on January 16, Christopher Waller, Governor of the Federal Reserve, discussed the recent economic data and its implications for future monetary policy decisions. Waller welcomed the strong jobs report from the previous week and the latest inflation prints, which he found particularly encouraging. He noted that the inflation data was very positive, with core PCE inflation coming in below 0.2% for the sixth month out of the last eight. This trend, he believes, is bringing inflation closer to the Fed’s 2% target in terms of core, despite a couple of bumps in September and October.
Waller emphasized that while the inflation data is promising, it is crucial to see if this trend continues. He mentioned that base effects from last year will play a role, but he is hopeful that a repeat of the shock experienced in January and February of last year will not occur again. If the current trend persists, he suggested that rate cuts could be on the table in the first half of the year.
When asked about the exact timing of potential rate cuts, Waller indicated that much depends on the continued improvement in inflation data. He stressed that the Fed is not in a rush to act, as Chair Jerome Powell has stated, and that they need to see more progress on inflation before making any decisions. Waller mentioned that while March is not entirely ruled out, any significant economic disruptions could push the timeline back. Regarding the number of rate cuts that might be expected this year, Waller reiterated that the data will drive the Fed’s decisions. He noted that the extent of progress on inflation and the perception of the neutral rate among policymakers will influence the number of cuts.
The latest consumer price data has sparked optimism among investors, as easing inflation and the possibility of interest rate cuts create a more favorable environment for businesses and markets.
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Our Methodology
To compile our list of the 15 best cheap stocks to buy for 2025, we used Finviz and Yahoo stock screeners to find the 40 largest companies trading below the forward P/E ratio of 15 as of January 15. We then used Insider Monkey’s Hedge Fund database to rank 15 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio as of January 15: 12.38
Number of Hedge Fund Investors: 98
Bank of America Corporation (NYSE:BAC) is one of the largest and most respected financial institutions in the world with a history of providing comprehensive financial services to individuals, businesses, and institutions. The bank is a global leader in consumer banking, wealth management, and investment banking.
Bank of America Corporation (NYSE:BAC) is continuously investing in technology and digital transformation. Over the past decade, the company has significantly reduced its workforce from around 300,000 to approximately 213,500, while simultaneously expanding its service offerings and improving operational efficiency. This has been achieved through the extensive use of automation and artificial intelligence. Erica, the company’s AI-powered virtual assistant has been a game-changer to save the equivalent of 3,000 full-time employees and handling an increasing number of customer interactions with high precision. Bank of America Corporation (NYSE:BAC) is also integrating AI into various aspects of its operations, from tech support to credit underwriting, to enhance customer experiences and operational efficiency.
Furthermore, Bank of America Corporation (NYSE:BAC) is focusing on core transactional banking, which includes maintaining a high percentage of primary accounts and increasing average balances. The company’s consumer base is also becoming more diverse, with a strong presence among younger demographics. Bank of America Corporation (NYSE:BAC) is also integrating technology and personalized services in wealth management, which is expected to further enhance customer satisfaction and drive market share gains.
Overall BAC ranks 4th on our list of the best cheap stocks to buy for 2025. 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.
