Bank of America's top stock picks for 2021 are doing better than last year's did — at least halfway through the year. But most are still failing to keep up with the S&P 500.
Only four of the giant bank's top 11 stocks for this year are topping the S&P 500, including energy firm Chevron, financial Allstate, health care HCA Healthcare and materials company Vale, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And even fewer of the picks, just two, are outperforming their S&P 500 sector: HCA and Vale. Going into 2021, Bank of America chose its favorite stock in each of the 11 S&P 500 sectors. Keep in mind that six of the sectors themselves are beating the S&P 500 this year, while five are lagging.
Such a mixed bag highlights just how tricky this market, flipping from growth to value and back, has been. And it underscores the need to follow time-tested investment rules.
"The rotation back into high-growth stocks and out of value is taking hold as U.S. Treasury yields fall," said Sophie Griffiths, market analyst at Oanda. "The high-growth tech sector often outperforms cyclicals when yield curves flatten."
BofA's Top Pick So Far
S&P 500 technology stocks might be coming alive again. But the health care sector is where BofA's picks are doing best.
Hospital operator HCA Healthcare saw its shares shoot up 31.7% this year. That easily tops the SPDR S&P 500 Trust's 16.2% gain. But it's also a standout in a ho-hum sector. The Health Care Select Sector SPDR is up just 13.7%, making it one of the laggards of the S&P 500.
Analysts see strong fundamentals backing up HCA, too. The company's profits are expected to jump more than 20% this year to $14.09 a share.
Worst Bank of America S&P 500 Pick So Far
Walt Disney stands out as BofA's worst S&P 500 selection. There's still time for the magic to kick in, though.
Coming into 2021, the media giant looked strong with its Disney+ streaming service plus the parks' planned reopening. And yet, shares of Disney are down nearly 5% this year so far.
That not only trails the S&P 500. It's also a disappointment as its communications services sector is one of 2021's top performers: up more than 21%. That's largely due to a more than 30% jump in sector champion, Facebook. Bank of America did not recommend the new $1 trillion company.
Analysts still stand by Disney. Analysts think Disney, which closed Wednesday at 172.73, should be worth nearly 20% more in 12 months. Disney's profit is expected to jump more than 18% to $2.39 a share in 2021. Should you buy Disney stock now?
Tech Throws Bank Of America For A Loop
S&P 500 tech stocks are a battleground. And BofA researchers got thrown like many other investors.
The tech sector is up 16.3% this year. That only marginally tops the S&P 500. And it's only due to a powerful June rally.
But BofA's top pick in technology, Qorvo, is up just 15.5% this year. That's slightly behind the S&P 500's 16.2% 2021 gain so far. And it's also lagging the S&P 500 tech sector itself.
BofA, though, got its low-tech call right.
Materials company Vale is up more than 30% this year. Yes, most materials stocks are mostly keeping up with the S&P 500. The Materials Select Sector SPDR ETF is up 14% this year. But Vale is a standout.
To be sure, the year is only half over. The S&P 500 is famously wild in the second half of the year. But it's starting to become more clear where BofA's much-watched picks hit or missed.
Bank Of America's Top 2021 Stock Picks, Ranked
| Company | Symbol | YTD % ch.* | Sector | YTD % ch. vs. sector | IBD Composite Rating |
|---|---|---|---|---|---|
| HCA Healthcare | 31.7% | Health Care | 18.0% | 89 | |
| Vale | 30.7% | Materials | 16.7% | 99 | |
| Chevron | 21.9% | Energy | -15.4% | 40 | |
| Allstate | 21.1% | Financials | -2.4% | 89 | |
| Qorvo | 15.5% | Information Technology | -0.8% | 91 | |
| Hilton Worldwide | 11.8% | Consumer Discretionary | -0.9% | 49 | |
| Alaska Air Group | 10.8% | Industrials | -5.9% | 23 | |
| Realty Income | 9.7% | Real Estate | -14.3% | 58 | |
| NextEra Energy | -2.4% | Utilities | -5.6% | 41 | |
| Walmart | -3.1% | Consumer Staples | -6.9% | 47 | |
| Walt Disney | -4.7% | Communication Services | -26.0% | 30 | |
| SPDR S&P 500 ETF Trust | 16.2% |
