We recently published a list of 12 Best Affordable 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 other best affordable stocks to buy.
Economic and Market Outlook 2025
There has been a growing debate regarding whether the economy of the United States will have a soft landing. A recent report by Vanguard titled “Beyond Landing” released on November 25 discusses the economic outlook for the year ahead. The report highlighted that global inflation has significantly decreased over the past two years, nearing the target of 2%. However, this decline has been inconsistent across different regions, with many developed markets experiencing slowdowns due to monetary policy adjustments. The United States stands out as an exception, showcasing robust economic growth and full employment despite restrictive monetary policies.
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The report raised critical questions about whether the US has achieved a “soft landing” or if high interest rates will eventually lead to a “hard landing.” The narrative has largely focused on the Federal Reserve’s ability to time rate cuts effectively to facilitate painless disinflation. Vanguard suggests that the strong growth and falling inflation in the US may be better explained by supply-side dynamics, such as increased labor productivity and a surge in available labor, rather than solely by Federal Reserve policies.
Regarding the 2025 outlook, the firm anticipates that US real GDP growth may decline from around 3% to closer to 2%, influenced by potential policy risks like trade tariffs and stricter immigration regulations. Core inflation is expected to remain above 2.5% for most of 2025. The firm also predicts that interest rates will stabilize at levels higher than those seen during the 2010s, fostering better returns in cash and fixed-income markets over the next decade. However, they express caution regarding equity markets due to elevated valuations. The report highlights a tension between momentum and valuation in risk assets, suggesting that while some stocks may continue to perform well, their high valuations could pose risks if economic conditions change unexpectedly.
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Our Methodology
To compile the list of the 12 best affordable stocks to buy right now, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we shortlisted stocks trading below a Forward P/E of 15, as of December 4, and that are expected to experience earnings growth this year. Next, we sorted our initial list by market capitalization and cross-checked the Forward P/E of each stock from Seeking Alpha and earnings growth from Yahoo Finance. Lastly, we ranked the stocks in ascending order of the number of hedge fund holders as per Insider Monkey’s database for Q3 2024.
Why do we care about what hedge funds do? 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).
Bank of America Corporation (NYSE:BAC)
Forward P/E Ratio: 14.65
Earnings Growth This Year: 5.26%
Number of Hedge Fund Holders: 98
Bank of America Corporation (NYSE:BAC) is one of the best affordable stocks to buy right now. It is a major American multinational investment bank and financial services holding company, headquartered in Charlotte, North Carolina. It operates through several key segments that cater to a diverse range of customers, including consumers, small businesses, corporations, and institutional investors.
The bank presents a compelling investment opportunity, particularly due to its robust focus on technology and innovation. In the third quarter of 2024, the bank reported a net income of $6.9 billion, driven by solid revenue growth across various sectors, including asset management and investment banking fees. The bank has ramped up its investment in the technology sector, according to an October 23 press release, its commitment to innovation resulted in a 95% increase in artificial intelligence and machine learning granted patent applications since 2022. Moreover, as of October 23, Bank of America Corporation (NYSE:BAC) had around 1,100 AI and ML patents and pending applications in its portfolio.
In addition to funding technology investments, the bank has worked towards streamlining its operations digitally. Digital sales accounted for 54% of total consumer sales, underscoring the effectiveness of its technological initiatives in driving revenue. Looking ahead, Bank of America Corporation’s (NYSE:BAC) focus on integrating high-tech solutions to its banking solutions is expected to enhance client relationships across its wealth management and consumer banking segments.
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 3rd on our list of best affordable stocks to buy right now. While we acknowledge the potential of BAC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher 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.
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Disclosure: None. This article is originally published at Insider Monkey.
