- Investors should always diversify their portfolio to reduce risk.
- With limited cash, one can try to bet on the bellwether stocks in each industry.
- Bank of America Merrill Lynch has published a list of its 11 favorite stocks for next year — one S&P 500 stock from each of the 11 Global Industry Classification Standard sectors.
- The firm's 2018 list has generated a 3.2% average return rate, outperforming the benchmark S&P 500.
BANK OF AMERICA: Here's a list of our 11 favorite stocks for next year
Bank of America published a list of its favorite stock in each sector for next year. The firm's list has proven to outperform the benchmark S&P 500.
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is here to help. At the end of each year, BAML publishes a list of its 11 favorite stocks for next year — one in each of the 11 sectors.
Walt Disney
Ticker:DIS
Sector: Communication Services
BAML comments: "One of highest quality S&P 500 stocks. Strong free cash flow, medium equity duration, low leverage. Big catalysts in 2019 (Disney Streaming Services, etc.) Underweight by large-cap active funds."
Source: BAML
General Motors
Ticker:GM
Sector: Consumer Discretionary
BAML comments: "Strong free cash flow, inexpensive valuations (6x fwd. P/E), underweight by large-cap active funds Positive betas to both real and nominal rates. Both near-term and longer-term potential catalysts in the pipeline (trade war resolution, autonomous driving, etc.)"
Source: BAML
Molson Coors Brewing
Ticker:TAP
Sector: Consumer Staples
BAML comments: "High quality, inex pensive (13x fwd. P/E), attractive FCF yield, above-market dividend yield Historically does well in periods of rising volatility. Underweight by large-cap active funds."
Source: BAML
Exxon Mobil
Ticker:XOM
Sector: Energy
BAML comments: "More defensive Energy stock – low sensitivity to oil. High quality, inexpensive, healthy free cash flow yield, attractive/growing dividend, low leverage Positively correlated to VIX historically, underweight by large-cap active funds."
Source: BAML
Morgan Stanley
Ticker:MS
Sector: Financials
BAML comments: "High quality, inexpensive (8x fwd. P/E), dividend grower Potential beneficiary of less onerous regulatory backdrop Strong recent EPS revisions, BofAML EPS above consensus."
Source: BAML
CVS Health
Ticker:CVS
Sector: Health Care
BAML comments: "High quality, low leverage, inexpensive (10x fwd. P/E), above-market dividend yield Potential synergies from acquisition of Aetna. Historically fares well in rising volatility environments."
Source: BAML
Raytheon
Ticker:RTN
Sector: Industrials
BAML comments: "Defense stocks should benefit from higher defense budget. Hedge against geopolitical risks. Inex pensive (14x fwd. P/E), high quality, above-market FCF yield, low leverage. Historically fares well in periods of rising volatility. Underweight by large-cap active funds."
Source: BAML
Microsoft
Ticker:MSFT
Sector: Information Technology
BAML comments: "High quality, dividend grower/medium equity duration, healthy balance sheet (net cash) Investing in future growth (R&D spenders typically rewarded). BofAML EPS above consensus."
Source: BAML
International Paper
Ticker:IP
Sector: Materials
BAML comments: "Inexpensive (8x fwd. P/E), high quality, attractive dividend yield BofAML EPS above consensus. Underweight by large-cap active funds."
Source: BAML
Simon Property Group
Ticker:SPG
Sector: Real Estate
BAML comments: "High quality, attractive/growing dividend yield. BofAML EPS above consensus; high-quality portfolio based on Real Estate Investment Trusts(REIT) team's analysis of mall REIT portfolios. Underweight by large-cap active funds."
Source: BAML
Public Service Enterprise Group
Ticker:PEG
Sector: Utilities
BAML comments: "High quality, attractive/growing dividend yield Historically fares well in rising volatility environments. Underweight by large-cap active fund."
Source: BAML
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