Time to buy cheap stocks and these fit the bill, says Bank of America

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Time to buy cheap stocks and these fit the bill, says Bank of America

The time has come to invest in cheap stocks for outperformance, according to Bank of America. Over history, cheap stocks have generally tended to beat their more expensive counterparts, Bank of America’s head of U.S. equity and quantitative strategy Savita Subramanian said in a recent note. She added that since 1986, the bank’s low forward price-to-earnings factor has beaten its high price-to-earnings factor by 4.6 percentage points each year. However, ahead of a market peak, the opposite tends to happen — that is, cheap stocks will underperform expensive ones, as they have over the past six months. But now, the market has seemingly reached an inflection point, where cheaper value stocks will fare better than growth names, Subramanian said. “The ‘Recovery’ regime unequivocally favors Value over Growth. Narrow bull markets led by growth stocks as in ’99/’00 tend to reverse violently into Value leadership. Inflation came in hot, the Fed might be done as our economists forecast a month ago and Value has generally outperformed Growth in the six months after the last rate cut,” she wrote. In the same note, the strategist shared a list of Bank of America’s buy-rated stocks that have low price-to-forward earnings ratios. Select stocks from the basket are shown below: One name on the list was First Solar . Shares of the solar energy equipment supplier are up about 1% in the last 12 months, and its current forward earnings yield is just 12.9%. In February, Mizuho upgraded the stock to an outperform rating from neutral. “Our opinion on the sales

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post-2026 has materially improved,” wrote analyst Maheep Mandloi. “The stock has likely underperformed YTD given negative sentiment around 45X manufacturing tax credits surviving Republican administration but, even in our base case assuming 45X expires after 2026 (1-year off-ramp), we see less pain for FSLR anyway offset by tariffs, leading to better negotiating power in 2027.” The 45X advanced manufacturing production credit was established by the Inflation Reduction Act of 2022. It provides a credit for the production and ***** of certain solar and wind energy components, inverters and more. Mandloi raised his price target to $259, up from his previous estimate of $218. This implies a roughly 62% potential upside ahead for the stock. Pharmacy retail stock CVS Health boasts a forward earnings yield of just 10.7%. The stock is down nearly 14% in the past 12 months. However, its strong fourth-quarter earnings report propelled shares to a weekly gain of nearly 22%. Following its latest quarterly results, Cantor Fitzgerald upgraded shares to an overweight rating from neutral. Analyst Sarah James also upped her price target to $71 from $62. This updated forecast is nearly 8% above where shares closed on Friday. James wrote that she decided to upgrade the stock “on increased confidence in a successful turnaround now that we have proof-of-concept cost trends returned to predictable patterns, and 2025 bids should be sufficient to drive margin expansion.” The analyst added that the sweeping changes CVS has recently made to its executive team, like hiring CEO David Joyner in October, has also increased her optimism for the company’s future. ” We believe CVS has the right team in place to execute the turnaround of Aetna and navigate a challenging environment on the regulatory and retail front,” she said. Shares of Charter Communications have surged 25% in the last year. The telecommunications stock’s current forward earnings yield is 10.7%. In December, KeyBanc analyst Brandon Nispel upgraded the stock to an overweight rating from sector weight. Nispel’s price target of $500 corresponds to roughly 39% upside for shares of Charter Communications. “Excluding ACP, we think CHTR should have modestly better underlying Broadband subscriber trends in ’25 vs. ’24, and see Rural net adds accelerating,” he wrote, referring to the Affordable Connectivity Program , which ended last June and affected a swath of Charter clients. “We think cost efficiency is under-appreciated, [earnings before interest, taxes, depreciation and amortization] should grow.”

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#Time #buy #cheap #stocks #fit #bill #Bank #America

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