We recently published a list of 10 Most Undervalued S&P 500 Stocks to Buy Now. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against other undervalued S&P 500 stocks to buy now.
Earlier on March 13, Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds, appeared on CNBC’s ‘The Exchange’ and began discussing his fund’s performance. Despite a challenging market environment, his fund achieved a 4% return this year, which he attributed to diversification rather than reliance on a single asset class like gold. The portfolio includes gold, silver, diversified equities, and bonds. When asked about market reactions to tariff-related headlines, Cuggino emphasized the importance of not overreacting to daily news fluctuations. He described the market’s behavior as herky-jerky and advised investors to focus on long-term opportunities rather than reacting impulsively. His base case anticipated some turbulence due to the transition under the new administration’s economic policies. His strategy involves identifying opportunities during volatile periods rather than making significant portfolio changes.
The discussion also featured David Zervos, Chief Market Strategist at Jefferies, who provided insights on Washington’s role in market volatility. Zervos acknowledged that while policies such as tariffs, immigration reforms, and drug policies were largely unfolding as expected, the speed of changes under the current administration was surprising investors. He pointed out rapid spending cuts and layoffs in the public sector as key contributors to market unease. For instance, courts recently ordered the federal government to rehire probationary employees who had been dismissed. Zervos likened this abrupt shift to transitioning from a public-sector-reliant economy to one driven by the private sector, which is a process that has introduced significant uncertainty. Regarding tariffs specifically, Zervos downplayed their overall impact on the US economy, which he described as domestically driven. While tariffs could affect specific industries like wine or automobiles with high overseas components, he argued that broader economic trends would be shaped by deregulation, reduced business costs, and a shift toward private-sector efficiency. He warned that the speed of these transitions could lead to short-term volatility but maintained optimism about long-term productivity gains.
Methodology
We used the Finviz stock screener to compile a list of the top S&P 500 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).
An executive in a suit checking a bank of computers symbolizing the technology of the financial services industry.
Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio as of March 14: 10.72
Number of Hedge Fund Holders: 113
Bank of America Corporation (NYSE:BAC) is a financial institution that offers products and services across four segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets. It serves individuals, businesses, and institutions worldwide.
The company’s Consumer Banking division generated ~$11 billion in 2024 revenue, which made up 40% of the company’s total earnings. Q4 2024 revenue alone was $10.6 billion. The segment added over 200,000 net new checking accounts, marking 6 years of growth. The company’s digital engagement was strong, with over 14 billion logins and digital sales exceeding 60% in Q4. The AI-powered “Erica” platform surpassed 2.5 billion interactions.
This year, the company laid off investment banking staff, which included junior bankers, analysts, and associates, following workforce reductions of about 1% after performance reviews. These cuts are part of annual talent management. Bank of America Corp. (NYSE:BAC) made the job cuts to reduce costs and align staffing with current market conditions in the investment banking sector.
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 2nd on our list of the most undervalued S&P 500 stocks to buy now. While we acknowledge the growth 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
