U.S. stocks are blowing the competition away.
In the past year, falling global economic growth forecasts and trade uncertainties have weighed on stock prices. Both the iShares Europe ETF (ticker: IEV) and the iShares MSCI Emerging Market ETF (EEM) are down 7% in the past 12 months. However, the U.S. stock market has been mostly immune to the weakness. The S&P 500 index is up 5.2% in the past year and recently made new all-time highs. With the U.S. leading the world in stock market returns, here are eight of Bank of America's top U.S.-listed stock picks.
Advanced Micro Devices (AMD)
Advanced Micro Devices has been on quite a run in recent years, but analyst Vivek Arya says AMD finally has a competitive edge against primary rival Intel Corp. (INTC) for the first time in history. For the time being, Arya says AMD has stronger products and manufacturing technology than Intel. AMD could potentially ride this momentum to a high double-digit share of the $20 billion data center server market over time if Intel doesn't defend its turf, Arya says. Bank of America has a "buy" rating and $40 price target for AMD stock.
Burlington Stores (BURL)
Burlington Stores has multiple catalysts in the second half of 2019, according to analyst Lorraine Hutchinson. Hutchinson says expectations for Burlington are extremely low, opening the door for the company to beat earnings expectations and raise its guidance in the near term. In addition, a new CEO and management team coming this fall should be aggressive with its long-term growth strategy. Hutchinson says there is potential for high single-digit annual sales growth and 3% margin expansion over the next three years. Bank of America has a "buy" rating and $190 price target for BURL stock.
Analyst Justin Post says Dropbox is transitioning from the commoditized consumer cloud storage business to the high-growth collaboration and productivity business. Dropbox's recently launched desktop app integrates workplace software from Microsoft Corp. (MSFT), GSuite, Slack (WORK) and Zoom (ZM). Post says the update is a clear signal of where the company is headed, which significantly improves Dropbox's long-term growth outlook. Post says the market is currently undervaluing Dropbox, which trades at a meaningful discount to software peers based on free cash flow and enterprise value. Bank of America has a "buy" rating and $33 price target for DBX stock.
Fidelity National Information Services (FIS)
FIS announced a major merger with Worldpay in March, and analyst Jason Kupferberg says the combined company will be a force in the global payments market. Kupferberg says FIS will begin realizing merger synergies in the next two quarters and expects the deal to be earnings accretive by the end of 2021. The company trades at a significant discount to other leading digital payments stocks, trading at only around 16 times Kupferberg's 2021 post-merger earnings per share estimate. Bank of America has a "buy" rating and $143 price target for FIS stock.
HD Supply Holdings (HDS)
Analyst Andrew Obin says industrial distributor HD Supply is growing earnings in line with its peer group, but it has higher margins and a potentially more defensive revenue mix. Despite these advantages, HD Supply shares trade at a discounted enterprise multiple to the overall distributor group based on projected 2020 earnings. Obin says the company's surprise decline in facilities management revenue in May was a transitory problem driven by a combination of issues at a new distribution center, inclement weather and a calendar shift. Bank of America has a "buy" rating and $51 price target for HDS stock.
Masco Corp. (MAS)
Just a few quarters ago, rising interest rates and raw materials and freight costs were pressuring home improvement manufacturers like Masco. However, analyst John Lovallo II says these headwinds have subsided, reaccelerating homebuilding demand in most regions throughout the U.S. Recession fears have eased in recent quarters, and U.S. consumers remain healthy and confident. The average age of U.S. houses is now nearly 44 years, a positive trend for Masco's business. Lovallo says Masco shares have significant valuation upside. Bank of America has a "buy" rating and $56 price target for MAS stock.
Northrop Grumman Corp. (NOC)
Analyst Ronald Epstein says defense contractor Northrop Grumman is an excellent way for investors to play defense in the market. Epstein says Northrop's rare combination of solid execution, a healthy balance sheet, a rising 1.5% dividend and reliable share buybacks is a recipe for market outperformance for investors. Not only is Northrop's business mostly insulated from the trade war, Epstein says the company is well-positioned to benefit from a trade war-driven push to upgrade Department of Defense security. Bank of America has a "buy" rating and $355 price target for NOC stock.
Analyst Timna Tanners says headline risk from the Brumadinho dam disaster has passed, and Vale will soon resume dividend payments that it suspended earlier this year. Tanners is forecasting about $5.7 billion in free cash flow for Vale in 2019 after factoring in $5 billion in Brumadinho costs. Bank of America projects FCF will grow to $8.4 billion in 2020. In the near term, Tanners says iron ore prices above $100 per ton should boost both Vale earnings and cash flow. Bank of America has a "buy" rating and $16 price target for VALE stock.
Great U.S. stocks to buy now.
-- Advanced Micro Devices (AMD)
-- Burlington Stores (BURL)
-- Dropbox (DBX)
-- Fidelity National Information Services (FIS)
-- HD Supply Holdings (HDS)
-- Masco Corp. (MAS)
-- Northrop Grumman Corp. (NOC)
-- Vale (VALE)
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