5. Bank of America
Bank of America’s shares have risen 44.6 percent year to date. Chase Investment Council quantitative analyst Brian Lazorishak noted that the financials overall are rebounding off of depressed levels.
Bank of America shares fell more than 50 percent last year, and JPMorgan Chaseshares declined more than 20 percent in 2011.
Lower rates from the U.S. Federal Reservealso are helping the banks, Lazorishak said.
Billionaire Warren Buffett defended Bank of America, saying CEO Brian Moynihan has made “excellent progress” cleaning up the mess of past management teams.
“We project a moderate recovery in market-based revenues and net interest margin this year, as well as lower costs stemming from the company’s Project New BAC expense initiatives as well as lower legacy asset servicing expenses as non-core real estate and other loans are resolved,” R.W. Pressrich analysts wrote in a Feb. 17 report. “Meanwhile, we expect asset quality to continue to improve, albeit at a more moderate pace than in 2011. We estimate FY2012 net revenues of $93.1 billion and net income at $7.2 billion, or $0.67 per share.”
The stock hit a 52-week high on March 8, 2011, of $14.70. Its 52-week low of $4.92 was set on Dec. 19.
Bank of America has an estimated price-to-earnings ratio for next year of 7.36; the average among its peers is 8.01.
For comparison, JPMorgan Chase has a lower forward P/E of 7.12; Wells Fargo’s forward P/E is 8.36.
Twenty-three of the 37 analysts who cover Bank of America rated it “hold.” Twelve analysts gave the stock a “buy” rating and two rated it “sell.” TheStreet Ratings gives Bank of America a “D+” grade and “sell” rating. The stock closed Monday at $8.04.
Caterpillar shares have gained 27.63 percent year to date. The construction company had a strong fourth quarter, and it is benefiting from signs of global economic improvement, Lazorishak said.
“Going into 2012 and beyond, it remains to be seen whether CAT can continue to drive its labor costs down on a relative basis, as it did in the 1980s and the 1990s, supporting high operating leverage, or whether we simply go back to the range of 18-22 percent experienced in the last cycle,” Bank of America Merrill Lynch analysts wrote in a Feb. 23 report. “This would mean that operating leverage could disappoint in the coming years.”
Caterpillar shares hit a 52-week high last Friday of $116.95. The stock’s 52-week low of $67.54 was set on Oct. 4, 2011. Caterpillar’s forward P/E is 10.22; the average for commercial vehicles and trucks is 12.29.
For comparison, Deere has a lower forward P/E of 9.81; Toro’s forward P/E is 13.29.
Nineteen of the 26 analysts who cover Caterpillar rated it “buy”; seven analysts gave the stock a “hold” rating. TheStreet Ratings gives Caterpillar an “A” grade with a “buy” rating and a $135.14 price target. The stock closed Monday at $115.63.
Microsoft shares have risen 20.76 percent year to date.
Chase Investment Council’s Lazorishak noted that Microsoft has lagged much of the technology sector for a while and now its valuation looks attractive.
“[Microsoft President Steven] Sinofsky affirmed the Windows Consumer Preview, or the beta version of Win 8 will be out by the end of February,” Bank of America Merrill Lynch analysts wrote in a Feb. 10 report. “Given the typical nine to 10 months lead time of beta ahead of the release candidate (RC), we think this milestone provides a significant boost to our confidence that Win 8 could ship by end of C12 on ARM and x86.”
Shares of Microsoft hit a 52-week high last Wednesday of $31.68. The stock’s 52-week low of $23.65 was set on June 6. Microsoft’s forward P/E is 10.48; the average for software companies is 28.26.
For comparison, both Oracle and Adobe Systems have higher forward P/Es of 11.36 and 12.47, respectively.
Twenty-six of the 40 analysts who cover Microsoft rated it “buy.” Thirteen analysts gave it a “hold” rating and one rated it “sell.” TheStreet Ratings gives Microsoft an “A” grade with a buy rating and a $36.23 price target. The stock closed Monday at $31.35.
Shares of Alcoa have gained 9.31 percent year to date. This stock is tied to the whims of global aluminum demand as well as signs of economic improvement, Lazorishak said.
The aluminum company is rated as the third top producer of aluminum in 2011 by production, according to Bloomberg. Alcoa made 3,669 metric tons of aluminum last year.
“We expect the stock to follow aluminum prices in the near term so that the dominant factor for Alcoa in 2012 will likely be the cyclical recovery in the LME price,” Davenport analysts wrote in a Jan. 23 report. “We project aluminum prices to rise from an average of $2,022/mt in December to an average of $2,550/mt in Q4’12.”
Alcoa shares hit a 52-week high on April 8 of $18.47. The stock’s 52-week low of $8.45 was set on Oct. 4. Alcoa’s forward P/E is 11.71; the average for aluminum companies is 11.76.
For comparison, both Kaiser Aluminum and Century Aluminum have higher forward P/Es of 13.72 and 13.29, respectively.
Nine of the 20 analysts who cover Alcoa rated it hold. Eight analysts gave the stock a “buy” rating and three rated it “sell.” TheStreet Ratings gives Alcoa a “C-” grade and a “hold” rating. The stock closed Monday at $10.32.
1. JPMorgan Chase
JPMorgan shares have increased 17.47 percent year to date. Of the company’s investor day on Tuesday, Deutsche Bank analysts wrote in a Feb. 22 report, “We expect more focus on expenses — including when and how quickly the $13 billion of costs outlined above will come down. JPM may also highlight how much less investment spend is needed from here. Lastly, we expect management to convey a downward bias to its 35 percent to 40 percent comp/revenue target in IBanking.”
JPMorgan Chase shares hit a 52-week high on April 7 of $47.80. The stock’s 52-week low of $27.85 was set on Oct. 4. The bank has a forward P/E of 7.12; the average among its peers is 8.01.
For comparison, Citigroup has a lower forward P/E of 6.9; Morgan Stanley’s forward P/E is 7.78.
Thirty-three of the 37 analysts who cover JPMorgan Chase rated it “buy”; four analysts rated it a “hold.” TheStreet Ratings gives JPMorgan Chase a “B” grade with a “buy” rating and a $44.46 price target. The stock closed Monday at $39.06.
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