Here are analysts’ top stocks to buy in the first quarter.
The S&P 500 closed out 2020 at all-time highs on optimism surrounding additional government stimulus measures and a potential global economic rebound in 2021. Investors are mostly looking past horrible 2020 earnings numbers and focusing on the path forward for the economy, but there is still significant uncertainty surrounding when, if ever, certain businesses will fully recover to pre-crisis levels. Bank of America recently released its quarterly list of the top eight stocks to buy in the first quarter. These eight stocks are high-conviction investment ideas that have market-moving catalysts coming sometime in the next three months.
Citigroup (ticker: C)
Analyst Erika Najarian says Citigroup is a particularly attractive value stock within an already undervalued financial sector that is poised to outperform in 2021. Bank of America is projecting both a macroeconomic rebound and a rebound in 10-year Treasury yields to 1.5% in the second half of 2021, both of which are bullish for Citigroup. The stock is priced at just 85% of tangible book value, which Najarian says doesn’t reflect its potential for roughly 10% normalized return on tangible common equity. Bank of America has a “buy” rating and $79 price target for C stock.
Foot Locker (FL)
Analyst Robert Ohmes says Foot Locker is a play on the strong performance of the Nike (NKE) product portfolio at a sharp valuation discount to Nike shares. Nike is making strategic exits from stores such as J.C. Penney, Belk and Dillard’s (DDS), which should create gross margin tailwinds for Foot Locker as a key Nike strategic partner. In fact, Ohmes says 70% of Foot Locker stores are located within two miles of a competing store that is either closing or Nike is exiting. Bank of America has a “buy” rating and $55 price target for FL stock.
Kansas City Southern (KSU)
Analyst Ken Hoexter says Kansas City Southern is an under-the-radar growth story among Class I Railroad stocks. Kansas City Southern generated better than peer average carload growth in 11 out of the past 12 quarters heading into the fourth quarter of 2020. Hoexter says Mexican industrialization, energy reform and cross-border commerce will be tailwinds for Kansas City Southern. He is projecting $150 million in 2021 cost savings from the ongoing precision scheduled railroading initiatives. The company is also only modestly exposed to the challenged coal industry. Bank of […]
