We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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Bank of America Corporation (NYSE:BAC)
Hosking Partners’ Stake Value: $65,278,001
Percentage of Hosking Partners’ 13F Portfolio: 2.41%
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) in Q2 of 2024 reported net income of $6.9 billion after tax, or $0.83 in diluted EPS. Earnings were evenly split between consumer and GWIM businesses, and institutional-focused global banking and markets business. Revenue growth from the second quarter of 2023 was driven by a rise in non-interest income, which offset the decline in net interest income. Fees increased by 6% year-over-year, making up 46% of total revenue, with a notable 14% rise in asset management fees in our wealth management sector.
Bank of America Corporation (NYSE:BAC) was able to add 278,000 net new checking accounts this quarter, totaling over 500,000 in the first half of 2024. Wealth management gained 6,100 new relationships, and the commercial sector expanded by thousands of small business accounts and hundreds of commercial banking relationships. Bank of America Corporation (NYSE:BAC) now manages $5.7 trillion in client balances, loans, deposits, and investments in the consumer and wealth management segments, with $58 billion in flows over the past year. Investment banking fees grew by 29% year-over-year, sales and trading revenue increased by 7%, and card and service charge revenue in its consumer business also grew by 6%.
While the analysts expect BAC’s EPS to decline by 4.7% to $3.26 on a diluted basis for the current fiscal year, the company has consistently exceeded consensus estimates over the past four quarters. On July 30, analyst Betsy Graseck of Morgan Stanley maintained a “Buy” rating for Bank of America with a $49 price target, suggesting a 21.6% upside potential
Overall BAC ranks 9th on our list of the best stocks to buy according to Hosking Partners. 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 timeframe. 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.
