Despite economic uncertainty, there are still highly rated stocks to help you diversify.
The S&P 500 is closing out a strong 2021 with an uptick in volatility heading into an uncertain 2022. Inflation is at its highest level in decades, supply chain disruptions and labor shortages are creating challenges for many companies, and the Federal Reserve has begun tapering its monthly asset purchases. In these unpredictable times, investors can always mitigate risk in their portfolios through the power of diversification. The Bank of America research team maintains a list of diversified top-tier American stock picks. Here’s one top stock to buy from each of the 11 market sectors, according to Bank of America.
Utilities: Vistra Corp. (ticker: VST)
Vistra is an integrated power company headquartered in Texas. Analyst Julien Dumoulin-Smith says Vistra is one of the biggest beneficiaries of soaring gas and power prices and is positioned to grow earnings before interest, taxes, depreciation and amortization, or EBITDA, in the long term. Vistra also pays a 2.9% dividend and is using excess cash to pay down debt and buy back stock. Finally, Vistra is investing in zero-carbon electricity via its Vistra Zero initiative. Dumoulin-Smith estimates that Vistra Zero alone could eventually be worth $10 per share. Bank of America has a “buy” rating and a $28 price target for VST stock, which closed at $20.73 on Dec. 13.
Real estate: Crown Castle International Corp. (CCI)
Crown Castle International is a real estate investment trust, or REIT, that owns and operates wireless communications towers. Analyst David Barden says Crown Castle’s tower business generates attractive, predictable cash flow growth. He adds that Crown Castle can capitalize on a ramp-up in wireless network development spending in the years ahead as global 5G upgrades continue. Barden projects 3.9% revenue growth and 26.1% earnings-per-share growth for Crown Castle in 2022. The stock also pays a 3% dividend. Bank of America has a “buy” rating and a $200 price target for CCI stock, which closed at $198.63 on Dec. 13.
Materials: Graphic Packaging Holding Co. (GPK)
Graphic Packaging produces paperboard packaging products. Analyst George Staphos says Graphic is his top stock pick in the paper and packaging group, which faces macroeconomic challenges from inflation and supply chain disruptions. Staphos says Graphic’s 2022 earnings guidance may be conservative, and the company has several potential bullish catalysts ahead in the next few quarters. The ramp-up of its $600 million Kalamazoo K2 paperboard machine and the integration of recently acquired AR Packaging should drive earnings growth and earnings multiple expansion, Staphos says. Bank of America has a “buy” rating and a $26 price target for GPK stock, which closed at $20.04 on Dec. 13.
Technology: Mastercard Inc. (MA)
Mastercard is a leading credit card, debit card and digital payments company. At its recent analyst day, Mastercard updated its long-term financial guidance, calling for a three-year compound annual revenue growth rate in the high-teens percentage range and an earnings-per-share growth rate of greater than 20%. Analyst Jason Kupferberg says Mastercard shares are attractively valued. Kupferberg says perceived threats of disruption by digital payment operators are overblown, and Mastercard management recently said many high-growth financial technology companies are closer to partners than competitors. Bank of America has a “buy” rating and a $416 price target for MA stock, which closed at $345.31 on Dec. 13.
Industrials: Eaton Corp. PLC (ETN)
Eaton produces industrial equipment and parts, including electrical systems and components. Analyst Andrew Obin says Eaton’s growing backlog, cost savings initiatives and strong end markets are all bullish for the stock. Eaton’s backlog grew 61% year over year in the third quarter to $8.7 billion. Obin projects double-digit growth in the commercial aerospace, vehicles, data centers and industrial facilities markets, which collectively account for about half of Eaton’s total revenue. Finally, Obin says Eaton is a beneficiary of the U.S. government’s focus on green initiatives. Bank of America has a “buy” rating and a $195 price target for ETN stock, which closed at $169.70 on Dec. 13.
Health care: Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific develops and produces analytical instruments and provides life sciences services. Analyst Derik de Bruin recently met with Thermo Fisher management and says the ongoing pandemic will continue to serve as a tail wind for the company’s diagnostic testing business. The company has guided for roughly $2 billion in fiscal 2022 revenue from COVID-19 vaccines, an estimate de Bruin says may be conservative given recent fears over the omicron variant. He projects 8.7% revenue growth in 2022 and 6.7% growth in 2023. Bank of America has a “buy” rating and a $680 price target for TMO stock, which closed at $646.01 on Dec. 13.
Financials: BlackRock Inc. (BLK)
BlackRock is the largest U.S. asset manager and one of the world’s leading investment management companies. Analyst Craig Siegenthaler says BlackRock is a market leader in several growth businesses, such as exchange-traded funds, fixed-income investing and asset management technology. Siegenthaler says BlackRock also has significant scale advantages that insulate the company from smaller competitors, and BlackRock’s iShares division is the largest ETF manager with a 32% share of the more than $9 trillion global ETF market. He says BlackRock shares will likely continue to trade at a valuation premium to peers. Bank of America has a “buy” rating and a $1,080 price target for BLK stock, which closed at $917.66 on Dec. 13.
Energy: Occidental Petroleum Corp. (OXY)
Occidental Petroleum is one of the largest U.S. oil and gas companies. Analyst Doug Leggate says Occidental’s extremely capital-efficient asset portfolio generates sector-leading free cash flow, including $2.3 billion in the third quarter alone. That cash flow helped Occidental significantly improve its balance sheet by retiring $4.3 billion in debt in the quarter. Leggate says Occidental is still in the early innings of a long-term recovery that he believes could accelerate in 2022 in a favorable energy market environment. Bank of America has a “buy” rating and a $50 price target for OXY stock, which closed at $29.23 on Dec. 13.
Consumer staples: Monster Beverage Corp. (MNST)
Monster Beverage is a leading energy drink manufacturer. Analyst Peter Galbo says Monster’s new can supply agreements should start having a positive impact on Monster’s logistics and supply chain in the fourth quarter, potentially relieving pressures on revenue growth and margins. Those improvements will be partially offset by rising aluminum prices. Heading into 2022, Galbo says, Monster could increase prices and will likely prioritize share buybacks. He says Monster offers investors superior growth, and the company should recover from pandemic challenges more quickly than peers. Bank of America has a “buy” rating and a $110 price target for MNST stock, which closed at $89.78 on Dec. 13.
Consumer discretionary: Amazon.com Inc. (AMZN)
Analyst Justin Post says Amazon’s leading e-commerce and cloud services businesses are firing on all cylinders heading into 2022. Incredibly, Amazon Web Services cloud revenue grew 39% in the third quarter, its fourth consecutive quarter of acceleration. AWS margins of 30.3% also exceeded consensus estimates. Post estimates that AWS accounts for about 43% of Amazon’s total value and predicts AWS alone will add $200 billion to Amazon’s market cap in 2022. Post says Amazon is “still the one to own” among e-commerce stocks, as well. Bank of America has a “buy” rating and a $4,250 price target for AMZN stock, which closed at $3,391.35 on Dec. 13.
Google and YouTube parent company Alphabet is the market leader in online advertising. Post says Alphabet’s search revenue growth of 44% in the third quarter exceeded consensus estimates, and Alphabet’s recent revenue growth trends are positive relative to online advertising peers. In addition, Post says margin expansion and share buybacks are key bullish catalysts for the stock. Alphabet was Post’s top stock pick among the mega-cap tech companies in 2021, and he remains positive on the stock heading into 2022. Bank of America has a “buy” rating and a $3,210 price target for GOOGL stock, which closed at $2,916.53 on Dec. 13.
Top stocks to buy in 11 different sectors:
— Utilities: Vistra Corp. (VST)
— Real estate: Crown Castle International Corp. (CCI)
— Materials: Graphic Packaging Holding Co. (GPK)
— Technology: Mastercard Inc. (MA)
— Industrials: Eaton Corp. PLC (ETN)
— Health care: Thermo Fisher Scientific Inc. (TMO)
— Financials: BlackRock Inc. (BLK)
— Energy: Occidental Petroleum Corp. (OXY)
— Consumer staples: Monster Beverage Corp. (MNST)
— Consumer discretionary: Amazon.com Inc. (AMZN)
— Communication services: Alphabet Inc. (GOOG, GOOGL)
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Update 12/14/21: This story was published at an earlier date and has been updated with new information.