Whenever Wall Street analysts recommend a stock, investors must keep two things in mind. First, their reputations and careers are on the line when making these recommendations, so going against the momentum and odds isn’t something they are likely to do. Second, knowing how important these decisions are to these analysts’ well-being, investors can place a much heavier weight on the decisions made during volatile markets like today’s S&P 500.
Waking up to the worst day of 2024 last week was a mere beginning for investors, as the so-called “Carry Trade” began unwinding in Japanese markets to alter the behavior in stock markets across the globe. Now, the uncertainty remains about whether any space and industry is safe for capital to stay in today’s environment. Analysts at Bank of America may have the answer.
Quoting that they like all “The other 493” names in the S&P 500, the bank’s research team specifically preferred large-cap value stocks. Rather than leaving investors to do their due diligence on what stocks might fit this description, they laid out the whole recipe instead. Alliant Energy Co. (NASDAQ: LNT), Procter & Gamble Co. (NYSE: PG), and even Costco Wholesale Co. (NASDAQ: COST) made it to the list of direct recommendations from the bank.
Seeking Safety? Alliant Energy Stock Is the Smart Utility Bet
At least, that’s what analysts suggest. Part of the consumer staples sector, or better said, in the basic services niche, Alliant Energy stock might provide an extra layer of safety for those looking to navigate today’s volatile environments.
It doesn’t matter whether the economy is booming or busting or whether the S&P rallies or crashes; people still need to pay for electricity, and that’s the reason behind Alliant stock’s low beta of 0.56. But there’s more than just stability to be had in this stock.
Even though the S&P sold off by as much as 10% from its 52-week high prices, Alliant stock now trades at 96% of its 52-week high, beating the market on absolute terms. More than that, investors can find the additional layer of safety, which is the company’s $1.92 payout to shareholders, translated into an annualized dividend yield of 3.42% today.
Beating inflation while staying out of the market drawdowns sounded like a good enough deal to these analysts, and those at Wells Fargo agreed by calling for up to 10.7% upside through their $62 a share price targets on Alliant stock.
A Weaker Dollar Could Boost Procter & Gamble Stock Performance
The price action repeats itself in Procter & Gamble stock, as it now trades at 96% of its 52-week high, while the S&P sold off by 10% roughly. Particularly, the reason why the S&P sold off might be the same tailwind helping Procter & Gamble keep its bullish prospects alive.
Unwinding the carry trade means a vote of no confidence in the U.S. Dollar, and while that is mostly bad news for stocks, it means great news for companies with lots of international sales exposure. Enter Procter & Gamble stock.
Forecasting up to 6.6% earnings per share (EPS) growth out of this company is one thing; calling for a double-digit upside in the stock price is another. Analysts at Citigroup agreed with Bank of America’s recommendation for Procter & Gamble by slapping on a $190 price target on the stock, daring it to rally by 11.4% from where it trades today.
To top off the bullish evidence, there have been signs of bearish capitulation lately. Procter & Gamble stock’s short interest declined by 5.2% in the past month, meaning that not even bears are willing to stick with their views on this company.
Bailing out of their short positions opened up some room for bullish investors, which is why investors will note up to $17 billion in institutional capital making its way into Procter & Gamble stock over the past 12 months.
Why Analysts Are Betting Big on Costco Stock
There is one business model that will always win, and it isn’t far off from Alliant’s. Costco’s discount model has allowed the stock to remain within 91% of its 52-week high price, yet still have a 10.5% EPS growth forecast for the next 12 months ahead.
This explains the $927 price target set on Costco stock by analysts at Deutsche Bank, calling for a net upside of 8.4% from its current level. Bank of America analysts realize the importance of a staples stock with a low beta in today’s uncertain market.
While Costco’s dividend yield is below 1%, noncompetitive with the other recommendations, analysts may have looked to momentum. Over the past year, Costco stock has delivered a 53.2% run to outpace the S&P 500 and its 19.6% rally.
Looking deeper into the momentum preference, Costco’s competitor Walmart Inc. (NYSE: WMT) only advanced by 26.7%, still falling behind Costco’s rally.
Security, upside, income, and momentum. Investors can find it all in today’s list of recommendations sent by Bank of America analysts.
