In this article, we discuss 15 stocks that BofA is recommending. If you want to see more stocks in this selection, click BofA Is Recommending These 5 Stocks.
The Bank of America Corporation, or BofA, is an American multinational investment bank and financial services firm. BofA monitors a portfolio of select stocks that returned -2.9% in August, exceeding the S&P 500 (SPY) return of -4.2% and the equal-weighted S&P 500 (RSP) return of -3.6%. BofA’s quantamental Alpha Surprise Portfolio for September consisted of securities from the semiconductors, utilities, communication services, and materials sectors, whereas the firm was most underweight on real estate, industrials, and energy.
BofA’s September picks are based on an Alpha Surprise score. Savita Subramanian, a strategist at the firm, explained the score system. She said the list is based on “a 25%/75% weighted combination of the decile scores from two proprietary models, our Dividend Discount Model (the value or ‘alpha’ portion of the model) and our BofA vs. Consensus Forecast Earnings Surprise Model (the growth or ‘surprise’ portion of the model)”. A decile rank of 1 is most attractive, whereas a rank of 10 is least desirable.
The stock market is quite volatile and seeking investment advice from market experts is always a good idea. This is why it is prudent to watch the stocks BofA is recommending, which include Intel Corporation (NASDAQ:INTC), Alphabet Inc. (NASDAQ:GOOGL), and Micron Technology, Inc. (NASDAQ:MU).
Our Methodology
We selected these stocks from BofA’s quantamental Alpha Surprise Portfolio for September 2022. These stocks were most attractively ranked based on the Alpha Surprise score. We have arranged the list according to the hedge fund sentiment around the securities, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
BofA Is Recommending These Stocks
15. Alliant Energy Corporation (NASDAQ:LNT)
Number of Hedge Fund Holders: 25
Alliant Energy Corporation (NASDAQ:LNT) is a Wisconsin-based company that operates as a provider of regulated electricity and natural gas services. On August 5, after announcing robust year-to-date results, the company reiterated its second half of 2022 earnings guidance range of $2.67 to $2.81 per share.
On August 12, BofA analyst Julien Dumoulin-Smith upgraded Alliant Energy Corporation (NASDAQ:LNT) to Buy from Neutral with a price target of $70, up from $62, categorizing it as a “winner” of the Inflation Reduction Act. The analyst expects Alliant Energy Corporation (NASDAQ:LNT) to benefit in the form of $1 billion higher capex on solar projects in the coming years, supporting EPS growth over the top end of management’s present 5%-7% target range. On August 18, Argus analyst David Coleman raised the price target on Alliant Energy Corporation (NASDAQ:LNT) to $75 from $70 and kept a Buy rating on the shares after the company reported Q2 results.
According to Insider Monkey’s Q2 data, 25 hedge funds were bullish on Alliant Energy Corporation (NASDAQ:LNT), up from 17 funds in the prior quarter. Michael Gelband’s ExodusPoint Capital is the leading position holder in the company, with 994,168 shares worth $58.2 million.
In addition to Intel Corporation (NASDAQ:INTC), Alphabet Inc. (NASDAQ:GOOGL), and Micron Technology, Inc. (NASDAQ:MU), BofA is bullish on Alliant Energy Corporation (NASDAQ:LNT) as per its latest portfolio disclosure.
14. Mohawk Industries, Inc. (NYSE:MHK)
Number of Hedge Fund Holders: 27
Mohawk Industries, Inc. (NYSE:MHK) is a Georgia-based manufacturer of flooring products for remodeling and new construction of residential and commercial buildings in the United States, Europe, Russia, and internationally. It operates through three segments – Global Ceramic, Flooring North America, and Flooring Rest of the World.
During Q2, the firm announced roughly $440 million in new acquisitions, with the biggest being the deal to acquire Vitromex, a notable ceramic manufacturer in Mexico. In early July, Mohawk Industries, Inc. (NYSE:MHK) also concluded the acquisition of Foss Floors, a leading American needle punch flooring manufacturer. The firm anticipates third quarter adjusted EPS to fall between $3.33 to $3.43, excluding any restructuring charges.
On August 17, Deutsche Bank analyst Joe Ahlersmeyer initiated coverage of Mohawk Industries, Inc. (NYSE:MHK) with a Hold rating and a $122 price target.
According to Insider Monkey’s data, 27 hedge funds were bullish on Mohawk Industries, Inc. (NYSE:MHK) at the end of June 2022, compared to 33 funds in the last quarter. Richard S. Pzena’s Pzena Investment Management is the biggest position holder in the company, with more than 2 million shares worth $256.70 million.
Here is what White Brook Capital has to say about Mohawk Industries, Inc. (NYSE:MHK) in its Q1 2022 investor letter:
“During the quarter, White Brook exited Mohawk Industries, Inc (NYSE:MHK). Mohawk is a founder-run leading flooring supplier, globally. I sold our position as tensions between Russia and Ukraine were beginning to build. The Company has a small factory in Russia, and I concluded that even if commercial and residential flooring needs were to grow in the region, transportation of those goods across eastern europe would, at best, be more costly. At the time, I expected a level of harassment and additional cost at the border, but was hyper aware of what followed when other autocrats in recent history built troops on their neighbors’ borders. The worst case ended up coming true, but White Brook Capital was out of the investment weeks before – able to trade a cheap, global, construction supplier with an overly conservative balance sheet for another that was also cheap, but levered to the US housing market instead, and was using their balance sheet to increase each share of stock’s per share earnings in front of anticipated growth. In making the transition, given the ability to better understand the US construction and renovation market vs the global flooring market, the position’s size was also increased. Mohawk ultimately represented a positive but unspectacular IRR given the length of time the investment was held.”
13. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 29
NRG Energy, Inc. (NYSE:NRG) is a Texas-based integrated power company that supplies electricity to approximately 6 million residential, commercial, industrial, and wholesale customers in the United States. On July 21, NRG Energy, Inc. (NYSE:NRG) declared a $0.35 per share quarterly dividend, in line with previous. The dividend was paid to shareholders on August 15. As of September 5, the stock delivers a dividend yield of 3.38%. NRG Energy, Inc. (NYSE:NRG) was one of the latest top picks of BofA.
On June 7, BofA analyst Julien Dumoulin-Smith downgraded NRG Energy, Inc. (NYSE:NRG) to Underperform from Neutral with a price target of $42, down from $43. The analyst’s downgrade was “primarily a valuation call”, and he observed that NRG Energy, Inc. (NYSE:NRG) shares have kept up with IPP competitors “despite no real commodity upside” and likely downside risk in retail margins.
According to Insider Monkey’s data, 29 hedge funds were bullish on NRG Energy, Inc. (NYSE:NRG) at the end of the second quarter of 2022, compared to 31 funds in the prior quarter. Lyrical Asset Management is a prominent stakeholder of the company, with 5.3 million shares worth over $203 million.
12. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 29
Sempra (NYSE:SRE) is a California-based energy-services holding company in the United States and internationally. The company provides electric services and natural gas. On August 4, Sempra (NYSE:SRE) posted market-beating Q2 2022 results. The company updated its full-year 2022 GAAP EPS guidance range to $6.90 to $7.50. As a result of robust execution and solid financial results in the first half of 2022, Sempra (NYSE:SRE) guided to the high end of its full-year 2022 adjusted EPS range of $8.10 to $8.70 versus a consensus of $8.55. The company also reaffirmed its full-year 2023 EPS guidance range of $8.60 to $9.20.
On July 18, Barclays analyst Eric Beaumont maintained an Overweight rating on Sempra (NYSE:SRE) but lowered the price target on the shares to $176 from $186. The analyst updated price targets in the North American power and utilities sector to reflect expectations of a reduced group multiple than priorly used. Given “general market issues” combined with an expected 10 year yield remaining over 3%, a lower multiple of 17-times is appropriate, the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, Israel Englander’s Millennium Management is the biggest stakeholder of Sempra (NYSE:SRE) as of Q2 2022, with 819,727 shares worth $123.18 million. Overall, 29 hedge funds were long Sempra (NYSE:SRE) at the end of June, up from 23 funds in the last quarter.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about Sempra (NYSE:SRE) in its Q1 2022 investor letter:
“Energy shortages in Europe were only intensified by the invasion. The conflict and economic sanctions against Russia have brought to the forefront EU dependence on Russian oil and natural gas. As Germany and its EU neighbors look to diversify their natural gas suppliers, some U.S. companies stand to benefit. Within the portfolio, Sempra Energy (NYSE:SRE) is well-positioned. Sempra’s previously underappreciated portfolio of infrastructure assets, with existing as well as prospective liquified natural gas (LNG) facilities, should benefit from renewed interest in U.S.-sourced LNG. The U.S. commitment to increase LNG exports to Europe over the coming years should create a favorable long-term demand environment and hopefully regulatory framework benefiting Sempra along with other natural gas and LNG suppliers. Sempra’s core utilities operations in California and Texas continue to generate solid mid- to high-single-digit earnings growth, and it enjoys additional growth opportunities from renewable natural gas (RNG), hydrogen and other renewable sources of energy.”
11. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 29
The Southern Company (NYSE:SO) was incorporated in 1945 and is headquartered in Atlanta, Georgia. The company specializes in the generation and distribution of electricity. It operates through Gas Distribution Operations, Gas Pipeline Investments, Wholesale Gas Services, and Gas Marketing Services segments. On July 18, The Southern Company (NYSE:SO) declared a quarterly dividend of $0.68 per share, in line with previous. The dividend is payable on September 6, to shareholders of record on August 15. The company delivers a dividend yield of 3.49% as of September 5.
On August 4, UBS analyst Ross Fowler upgraded The Southern Company (NYSE:SO) to Buy from Neutral, lifting the price target to $87 from $76. The company’s post-Vogtle growth profile should boost fleet transformation opportunities to reach its 2050 net zero carbon emissions goal, the analyst told investors.
According to Insider Monkey’s data, 29 hedge funds were bullish on The Southern Company (NYSE:SO) at the conclusion of June 2022, compared to 28 funds in the prior quarter. Jim Simons’ Renaissance Technologies is the leading stakeholder of the company, with roughly 2 million shares worth $138.7 million.
10. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 30
American Electric Power Company, Inc. (NASDAQ:AEP) is an Ohio-based electric public utility holding company, engaged in the generation and distribution of electricity to retail and wholesale customers in the United States. American Electric Power Company, Inc. (NASDAQ:AEP) on July 19 declared a $0.78 per share quarterly dividend, in line with previous. The dividend is distributable on September 9, to shareholders of the company as of August 10. After announcing above consensus Q2 results on July 27, the company also reaffirmed its 2022 operating earnings guidance range of $4.87 to $5.07 and 6% to 7% long-term growth rate.
On July 28, Citi analyst Ryan Levine raised the price target on American Electric Power Company, Inc. (NASDAQ:AEP) to $99 from $94 and maintained a Neutral rating on the shares after the Q2 earnings beat.
According to Insider Monkey’s second quarter database, 30 hedge funds were bullish on American Electric Power Company, Inc. (NASDAQ:AEP), compared to 33 funds in the preceding quarter. Jim Simons’ Renaissance Technologies is the leading position holder in the company, with more than 1 million shares worth $99 million.
Like Intel Corporation (NASDAQ:INTC), Alphabet Inc. (NASDAQ:GOOGL), and Micron Technology, Inc. (NASDAQ:MU), elite investors are pouring into American Electric Power Company, Inc. (NASDAQ:AEP).
Here is what ClearBridge Investments Value Equity has to say about American Electric Power Company, Inc. (NASDAQ:AEP) in its Q1 2022 investor letter:
“About 5% of the portfolio is in transitioning power companies, typically migrating from coal to renewables. We have been active in encouraging these transitions and added a new position in American Electric Power (NASDAQ:AEP). AEP has the fastest planned renewable energy ramp in the U.S., with plans to both shrink coal and grow renewables by 50% each by 2030. This would drive an 80% emissions reduction, while supporting high single-digit earnings growth at a double-digit return.”
9. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 33
Air Products and Chemicals, Inc. (NYSE:APD) provides atmospheric gasses, process and specialty gasses, and related equipment and services worldwide. After announcing strong Q2 results, Air Products and Chemicals, Inc. (NYSE:APD) reiterated guidance for full-year adjusted EPS of $10.20-$10.40, which would be 14% more than the prior year at the midpoint, and for Q4 adjusted EPS of $2.68-$2.88, up 7%-15% compared to the same period last year.
On August 15, BMO Capital analyst John McNulty upgraded Air Products and Chemicals, Inc. (NYSE:APD) to Outperform from Market Perform with a price target of $321, up from $283. The risk/reward profile has improved notably in the last few months as Air Products and Chemicals, Inc. (NYSE:APD) carried out better execution in terms of energy inflation and cost management, observed the analyst.
Among the hedge funds tracked by Insider Monkey, Israel Englander’s Millennium Management is the leading position holder in Air Products and Chemicals, Inc. (NYSE:APD), with 498,408 shares worth about $120 million. Overall, 33 hedge funds were long Air Products and Chemicals, Inc. (NYSE:APD) at the end of June 2022, compared to 39 funds in the last quarter.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about Air Products and Chemicals, Inc. (NYSE:APD) in its Q1 2022 investor letter:
“While commodities-exposed areas of the materials sector such as mining and steel fared well in the quarter, we tend to have less direct exposure to commodities across our portfolio. Holdings like industrial gas company Air Products and Chemicals (NYSE:APD) faced sharp input cost escalation, driving meaningful margin compression, which was not well-received by investors. While negative in the short term, we remain confident that the company will be able to adjust pricing accordingly and recover margins over the medium term.”
8. International Flavors & Fragrances Inc. (NYSE:IFF)
Number of Hedge Fund Holders: 34
International Flavors & Fragrances Inc. (NYSE:IFF) is a New York-based company that manufactures and sells cosmetic actives and natural health ingredients, operating through Nourish, Scent, Health & Biosciences, and Pharma Solutions segments. International Flavors & Fragrances Inc. (NYSE:IFF) is one of the top picks of BofA’s Quantamental Alpha Surprise Portfolio for September.
On August 8, International Flavors & Fragrances Inc. (NYSE:IFF) declared a $0.81 per share quarterly dividend, a 2.5% increase from its prior dividend of $0.79. The dividend is payable on October 5, to shareholders of the company as of September 23. This marks thirteen years of consecutive dividend increases by the company.
On August 10, Baird analyst Ghansham Panjabi maintained an Outperform rating on International Flavors & Fragrances Inc. (NYSE:IFF) and lowered the price target on the shares to $140 from $160. The analyst observed that the management is focused on developing a realistic and sustainable earnings algorithm, which will be announced at the December 7 Analyst Day. However, he believes International Flavors & Fragrances Inc. (NYSE:IFF) needs to urgently work on deleveraging.
Among the hedge funds tracked by Insider Monkey, International Flavors & Fragrances Inc. (NYSE:IFF) was part of 34 hedge fund portfolios at the end of Q2 2022, up from 33 funds in the last quarter. Scott Ferguson’s Sachem Head Capital is the leading stakeholder of the company, with 6.25 million shares worth $745.2 million.
Here is what Rhizome Partners has to say about International Flavors & Fragrances Inc. (NYSE:IFF) in its Q1 2021 investor letter:
“We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as IFF. We do understand the market’s rationale. IFF’s products account for a small percentage of the customers’ cost while playing critical roles in the products’ performance. With some operating leverage, the company can probably grow FCF at 4-6% a year. This brings the total return close to the long-term return of the S&P 500 index of 10%. Through trial and error, we have come to appreciate how scale, higher market share, route densities, switching costs, and collaborative relationships amongst major industry players can contribute to sustained high returns on invested capital.”
7. West Pharmaceutical Services, Inc. (NYSE:WST)
Number of Hedge Fund Holders: 34
West Pharmaceutical Services, Inc. (NYSE:WST) is a Pennsylvania-based company that develops and sells containment and delivery systems for injectable drugs and healthcare products.
Despite delivering market-beating Q2 results, West Pharmaceutical Services, Inc. (NYSE:WST) lowered its guidance for the year. The FY22 revenue guidance was updated to lie between $2.950 billion to $2.975 billion, compared to a prior range of $3.050 billion to $3.075 billion. The consensus revenue estimate is $3.05 billion. The updated non-GAAP EPS guidance ranged from $9.00 to $9.15, versus the earlier estimate of $9.30 to $9.45 and a consensus of $9.27.
According to the second quarter database of Insider Monkey, 34 hedge funds held stakes worth about $803 million in West Pharmaceutical Services, Inc. (NYSE:WST), compared to 35 funds the prior quarter worth $1 billion. Henry Ellenbogen’s Durable Capital Partners is the leading stakeholder of the company, with 994,036 shares worth $300.5 million.
Here is what Baron Funds has to say about West Pharmaceutical Services, Inc. (NYSE:WST) in its Q3 2021 investor letter:
“West Pharmaceutical Services, Inc. manufactures components and systems for the packaging and delivery of injectable drugs. Its shares rose after the company reported financial results that exceeded Street expectations in both its base business, as well as sales of its products related to COVID-19 vaccines. Based on these strong results, management raised its earnings guidance for the full year. We continue to believe West has a long runway for growth and margin expansion driven by a shift in its business toward high-value packaging components.”
6. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders: 42
General Dynamics Corporation (NYSE:GD) is a Virginia-based aerospace and defense company. It operates via four segments – Aerospace, Marine Systems, Combat Systems, and Technologies. General Dynamics Corporation (NYSE:GD) has secured billions worth of military and navy contracts in August. General Dynamics Corporation (NYSE:GD) on August 3 declared a $1.26 per share quarterly dividend, in line with previous. The dividend is payable on November 10, to shareholders of record on October 7. The company delivers a dividend yield of 2.24% as of September 5.
RBC Capital analyst Ken Herbert on August 29 initiated coverage of General Dynamics Corporation (NYSE:GD) with an Outperform rating and a $275 price target. The company is investing to substantially raise its Gulfstream jet production, which should be a source of both revenue and margin upside through 2024 as the company looks to further its competitive position, said the analyst. The analyst categorized General Dynamics Corporation (NYSE:GD) as “a leading global brand at an attractive valuation”.
According to Insider Monkey’s data, 42 hedge funds were bullish on General Dynamics Corporation (NYSE:GD) at the end of the second quarter of 2022, compared to 47 funds in the last quarter. James A. Star’s Longview Asset Management is the largest shareholder of the company, with 30 million shares worth $6.65 billion.
BofA is recommending General Dynamics Corporation (NYSE:GD) amid the current market turbulence, in addition to Intel Corporation (NASDAQ:INTC), Alphabet Inc. (NASDAQ:GOOGL), and Micron Technology, Inc. (NASDAQ:MU).
Here is what Oakmark Global Fund has to say about General Dynamics Corporation (NYSE:GD) in their Q1 2021 investor letter:
“The second new U.S. equity purchase was General Dynamics, a leading U.S. defense contractor and owner of the world’s premier business jet franchise (Gulfstream). We were able to purchase this high-quality and durable business at a meaningful discount to our estimate of its intrinsic value after a series of near-term concerns hurt its share price. Taking a longer term view, the company’s business jet franchise should benefit from a multi-year investment program in new, differentiated products. Also, its free cash flow conversion is set to improve materially and the company is poised to benefit from a highly visible ramp up in revenue related to next generation nuclear-powered submarines. As these positives come into clearer view, we expect sentiment to improve, along with the company’s share price.”
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Disclosure: None. BofA Is Recommending These 10 Stocks is originally published on Insider Monkey.
