Walmart, Disney, Hilton expected big movers in 2021
Bank of America analysts expect value stocks to emerge as market leaders next year after ceding the spotlight to booming growth stocks in 2020; here are 11 stock picks they say will shine next year.
The first picks center around the reopening play, with Walt Disney, Hilton Worldwide and Alaska Air all best-positioned in their hard-hit sectors to reap the benefits of a worldwide reopening in the second half, Bank of America says.
Chipmaker Qorvo, up 38% this year, is BofA's pick thanks to its has secular growth trends in 5G and advantage in the Internet-of-things space, as well as promising prospects once interest rates rise and the "tit-for-tat" tariffs imposed by President Donald Trump come to an end.
Meanwhile, energy and financials have tanked the most this year–32% and 7%, respectively–but they're Bank of America's top two sectors for next year and both "unapologetically cyclical and value-focused," with Allstate and Chevron heading up potential upside.
Retail giant Walmart serves as the best defensive hedge in the consumer staples sector, Bank of America says, and stands to gain from its focus on digitization, which has helped boost the firm's shares during a pandemic that's roiled many brick and mortars; shares are up 23% this year.
Growth in environmental, social and governance investing will continue to accelerate as investors more heavily scrutinize the quality of ESG disclosures, Bank of America says, and iron-ore producer Vale in materials and NextEra Energy both present key opportunities in the space.
In the two remaining sectors, "neglected" real estate investment trust Realty Income, which has plunged 15% this year, and HCA Healthcare, slightly outperforming the broader sector with 12% gains, are "high-quality value" stocks well-primed for 2021, Bank of America notes.
6%. That's how much Bank of America expects the S&P 500 could climb by the end of 2021, saying that the "recovery is intact and the world will likely reopen in the second half of the year, but a lot of optimism is priced in already on [expectations for] the vaccine and recovery."
WHAT TO WATCH FOR
The greatest risks to the bank's market outlook for next year include problems with vaccine execution, delayed fiscal stimulus and additional government-imposed lockdowns.