Bank of America says there are some unloved stocks among active managers worth a look headed into the New Year.
To be more precise, 11 names. The companies on BofA’s hot list include: NRG Energy; BorgWarner; CVS Health; Eastman Chemical Company; Eaton Corporation; Exxon Mobil; F5 Inc.; Mondelez; Walt Disney; Wells Fargo; Welltower.
“These stocks have 23% implied upside on average to our analysts’ price objectives (as of December 16, 2021), plus an average dividend yield of 2.2% (vs. 1.7% for the 11 sectors on average). These stocks are mostly neglected by active funds and benefit more from inflation, higher GDP, higher interest rates, higher oil prices and wage growth than an equal-weighted 11 sector portfolio, all of which we expect will occur in 2022,” explained BofA’s equity and quant strategist Savita Subramanian.
Positive company-specific catalysts or not, the markets are set up for a more volatile year in 2022 amid the hawkish shift in policy from the Federal Reserve this week, pros say.
“One of the things I am thinking about for 2022 is, I think we need to expect more volatility. I think it’s unrealistic to think that a liquidity-driven market that has really seen nothing but continued fiscal and monetary stimulus flowing in, that as that flows out you won’t get hiccups in the markets,” said Steve Sosnick, Interactive Brokers chief strategist, on Yahoo Finance Live.
Sosnick’s comments came as the major indices swung violently between gains and losses on Friday, with the Dow Jones Industrial Average down more than 500 points at one point.
Added Sosnick, “This week might actually be the first of those hiccups. But I don’t think you start to see it until the taper is done or the taper really gets into motion behind us. That is going to cause air pockets in the markets.”