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8 Stocks to Buy With First-Quarter Catalysts

Wayne Duggan

Stocks that are primed for a boost.

After a big year in 2019, the S&P 500 is off to a hot start in 2020 as well. The good news for investors is that conditions for the market have improved. Interest rates are much lower than a year ago, trade war tensions appear to have eased and the U.S. economy is on stable footing. Unfortunately, it's getting more difficult to find stocks that are clearly undervalued. Here's a look at Bank of America's list of eight stocks to buy with clear near-term catalysts between now and the end of the first quarter.

AT&T (ticker: T)

Analyst David Barden says there are plenty of things to like about AT&T in 2020. The company's new buyback program and its cost-cutting initiatives should help boost earnings per share. Consensus earnings expectations are well below the midpoint of company guidance, suggesting AT&T has a low bar to clear. Barden says the stock is also trading at a heavy discount to the overall market. In the first quarter, Barden says investors can look for underweight active managers to increase their AT&T weighting. Bank of America has a "buy" rating and $43 price target for T stock.

BioMarin Pharmaceutical (BMRN)

Some of the biggest and best market catalysts come from the biotech sector. Analyst Geoff Meacham says the U.S. Food and Drug Administration should accept the Biomarin Pharmaceutical filing for valrox by the end of March and approve the filing by the end of the year. Meacham says even the acceptance would likely be a bullish catalyst given concerns that the application won't be sufficient for review. Meacham says BioMarin has a diversified portfolio of approved drugs and an impressive late-stage development pipeline. Bank of America has a "buy" rating and $95 price target for BMRN stock.

CF Industries Holdings (CF)

CF Industries is the world's largest producer of nitrogen products, which are primarily derived from natural gas and used in fertilizer. Analyst Steve Byrne says the trend in falling global urea prices will likely reverse in the first half of 2020 given exports from China should drop and no additional supply is expected to enter the market. Higher urea prices are good news for CF's margin outlook. Key first-quarter catalysts include fourth-quarter earnings expected out in mid-February, rising urea prices and lower-than-expected natural gas prices. Bank of America has a "buy" rating and $56 price target for CF stock.

Fortive Corp. (FTV)

Fortive is a professional instrumentation and industrial technologies company. Analyst Andrew Obin says the company's 2020 margins should increase by 1% due to $45 million in productivity initiatives implemented in the fourth quarter, as well as integration of its Advanced Sterilization Products acquisition. Obin says the spin-off of Fortive's industrial technologies segments in the first half of 2020 could serve as a bullish catalyst for the stock. The spin-off will allow the company to focus on its transition to high-growth, high-margin software revenue. Bank of America has a "buy" rating and $94 price target for FTV stock.

Raytheon Co. (RTN)

Like Fortive, aerospace and defense giant Raytheon is going through some major restructuring that analyst Ronald Epstein says could create significant value. Epstein says he is bullish on Raytheon's current business, and he is optimistic that its merger with United Technologies Corp. (UTX) could unlock value. In addition to the United merger, Epstein says fourth-quarter earnings in late January and President Donald Trump's annual budget request in February or March could be bullish near-term catalysts. Heightened tensions with Iran could also improve defense stock sentiment. Bank of America has a "buy" rating and $265 price target for RTN stock.

ViacomCBS (VIAC)

The newly combined media giant ViacomCBS is another top stock pick with near-term catalysts. Analyst Jessica Reif Ehrlich says the long list of catalysts for ViacomCBS starts with a number of key affiliate renewals coming up this year. In addition, the merger itself should provide at least $500 million in annual synergies, and non-core asset sales should help improve the combined company's balance sheet. Finally, political ad spending should really start to ramp up ahead of the first sets of Democratic primaries in February. Bank of America has a "buy" rating and $60 price target for VIAC stock.

Wix.com (WIX)

Shares of cloud-based web development platform Wix have nearly tripled in the past three years and analyst Nat Schindler says there is more potential upside ahead in the first quarter. Schindler says Wix will follow the transition path that Intuit (INTU) used for its TurboTax service, shifting from a do-it-yourself customer base to a mix of do-it-yourself and professional customers. If fourth-quarter earnings in mid-February indicate increases in net subscribers and/or revenue per subscriber, Schindler says investors can expect a positive market reaction. Bank of America has a "buy" rating and $160 price target for WIX stock.

Exxon Mobil Corp. (XOM)

Exxon Mobil has been a market laggard for years, but analyst Doug Leggate says the energy giant's stock may finally come to life in the opening months of 2020. Leggate says Exxon is now two years into a strategy that is intended to double its cash flow by 2025. Also, 2020 will mark the first oil production from its Guyana projects, which are expected to deliver the lion's share of that growth. Guyana production, earnings support from refining and asset sales are all near-term catalysts, Leggate says. Bank of America has a "buy" rating and $100 price target for XOM stock.

Stocks to buy with first-quarter catalysts:

-- AT&T (T)

-- BioMarin Pharmaceutical (BMRN)

-- CF Industries Holdings (CF)

-- Fortive Corp. (FTV)

-- Raytheon Co. (RTN)

-- ViacomCBS (VIAC)

-- Wix.com (WIX)

-- Exxon Mobil Corp. (XOM)

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