We recently compiled a list of the 10 Best Undervalued Stocks to Buy Right Now. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against the other best undervalued stocks.
As per Evercore, the equity market rally is expected to further accelerate under the Donald Trump presidency. The S&P 500 is expected to touch 6,600 by June end. This growth in the index is expected to stem from Trump’s deregulatory agency, which should fuel corporate profits. Trump is expected to act fast to enact his policies.
The investment firm went on to add that measures such as deregulation and corporate tax cuts are expected to fuel business activity and unlock significant rally in stocks. The bull market’s 2-year run stemmed from healthy growth from mega-cap technology stocks, and high valuations are expected to further rise. Evercore hinted at data demonstrating that the average bull market witnessed an increase of 152% over 50 months, while the current market saw a run-up of only 65% over the previous 25 months.
Trump’s Next Presidency- How Will It Affect US Economy?
After Donald Trump’s win, economists and market strategists have been assessing how his economic policies might affect the broader US economy and equity markets. While the initial reaction was positive, some experts opine that Trump’s plans might fuel inflation, which will hurt consumers hoping to get some respite from it. Trump’s tax plan revolves around extending the provisions in the TCJA. The provisions are yet to expire at 2025 end. These provisions consist of lowered tax brackets and expanded standard deduction.
Trump’s campaign proposed lowering the corporate tax rate to 15% from the current rate of 21%. What will be the impact on the economy? Well, the economy might initially grow moderately under Trump’s plans. That being said, the impact might fade over time, mainly because of the effect of deporting millions of immigrants, as per Oxford Economics. As per the chief U.S. economist at Oxford Economics, the real GDP might grow 0.3 percentage points higher in 2026 as compared to the situation if existing policies continue. However, in 2028, the GDP growth might eventually fall to 0.6 percentage points lower in 2028 as compared to earlier projections as a result of deportations and increased tariffs.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Inflation Under Trump’s Presidency
Consumers tend to rank inflation among their biggest economic concerns. Global economists and market strategists believe that Trump’s Presidency can reignite inflation worries. According to investing legend, Jim Rogers, Trump’s tariffs might increase domestic inflation. As a result, the US Fed will be forced to keep the interest rates high. He further added that higher tariffs on goods, commodities, and products will lead to increased global inflation.
Moreover, Trump has plans to deport millions of immigrants. This can also fuel inflation as employers will experience labor crunch, resulting in higher wages.
While there are some uncertainties regarding the potential impacts of Trump’s economic policies, market experts believe that investors can go long on stocks that remain undervalued despite the recent rally.
Our Methodology
To list the 10 Best Undervalued Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the list of stocks trading at a forward P/E multiple of less than 15. Next, we selected the stocks which were popular among hedge funds. Finally, the stocks were ranked in the ascending order of their hedge fund sentiments, as of Q2 2024.
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).
An investor analyzing the performance of the Midstream/Energy stocks at a trading desk.
Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio as of 8 November: 12.3x
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) offers banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide.
Market experts believe that Bank of America Corporation (NYSE:BAC)’s focus on technological innovation and strong investments in technology should continue to act as a growth catalyst. Its commitment to innovation resulted in a 94% increase in AI and ML-granted patents and pending patent applications since 2022. Bank of America Corporation (NYSE:BAC) has ~1,100 AI and ML patents and pending applications in its portfolio, with over half having already been granted. The company spends more than $12 billion annually on technology. Of this, ~$4 billion will be focused on new technology initiatives in 2024.
Wall Street believes that its strong, low-cost deposit base, together with a diversified business model throughout retail, commercial, and investment banking, are some of its key strengths. Bank of America Corporation (NYSE:BAC)’s strategic positioning stems from its ability to garner deposits and leverage this growth with loans, which should fuel stronger long-term earnings growth.
Furthermore, the company’s strong deposit franchise enables it to enhance its market share. This can result in increased deposit growth, offering additional low-cost funding for loan growth or securities investments, further enhancing Bank of America Corporation (NYSE:BAC)’s earnings potential. The bank’s healthy position in capital markets and wealth management provides significant upside potential. As and when there is an improvement in market conditions, Bank of America Corporation (NYSE:BAC) might see significant growth in investment banking fees, trading revenues, and asset management income.
Barclays increased its price target on the company’s shares from $49.00 to $53.00, giving an “Overweight” rating on 16th October. Diamond Hill Capital, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“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 1st on our list of the 10 best undervalued stocks to buy right now. While we acknowledge the potential of BAC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.