Wall Street banks love these under-the-radar stocks they say can beat the market

Published Thu, Mar 17 20227:41 PM EDT

Wall Street firms Bank of America and Citi have identified dozens of under-the-radar U.S. and global stocks across sectors such as tech, energy and health care, saying they could all outperform the wider market. Bank of America's analysts picked their most out-of-consensus global stocks that they are most upbeat on, assigning each pick a "beat factor" score — a rating out of 100. The bank's top pick is buy-rated aluminum firm Norsk Hydro , which scores 100. "Our analysts' price objective for Norsk Hydro is 21% above consensus and their estimates for 2022 and 2023 EPS are both around 70% above," the analysts stated in a research note dated March 14. EPS refers to earnings per share, a key measure of a stock's likely performance. It also rates industrial engineering firm Spirax-Sarco a buy, giving it a beat factor of 98. It's also buy-rated on Swedish bank SEB as well, giving the company a score of 92. Other stocks on its list include Dutch semiconductor equipment-maker ASM International with a beat factor of 98, and French luxury group LVMH , with a beat factor of 96. Also on the list is Swiss conglomerate Richemont , with a beat factor of 94. "Beat Factor identifies BofA research analysts' most out-of-consensus stock ideas within the FTSE Eurofirst 300 universe," the bank said. "The Beat Factor score is an equal-weighted measure based on our analysts' price objectives, FY1 earnings and FY2 earnings estimates relative to consensus," it added. Bank of America updates its top 10 beat factor list each month. Energy group Engie , luxury brand Hermes and Chilean miner Antofagasta dropped out of the beat factor list in March, while Norsk Hydro, TotalEnergies and fashion company Moncler joined it. Citi's picks In a research note published March 14, Citi analysts named "outlier" stocks to help investors find buying opportunities they say have "incremental alpha" amid market uncertainty caused by the Russia-Ukraine war. Alpha refers to a stock's ability to outperform the market. Buy-rated outlier stocks included Walt Disney , Discovery and casino-owner Las Vegas Sands , as well as clothing brands American Eagle , Abercrombie & Fitch and Ralph Lauren . Health care stocks on Citi's buy-rated list included drug company Baxter International , life sciences firm Bio-Rad Laboratories and medical device firm Penumbra , while investment bank Raymond James , credit card company Capital One and M & T Bank were among its financials picks. Citi's technology picks included glass tech firm Corning , software company Teradata and cybersecurity business Fortinet , and in the materials' sector it chose packaging company WestRock , aluminum producer Alcoa and chemicals firm Eastman . All are buy-rated by Citi. Citi's U.S. stocks team worked with quantitative strategy colleagues to identify factors such as a stock's sensitivity to the market as well as wider economic influences, to analyze its performance. They then picked stocks they named outliers. "The Russia-Ukraine conflict has led to investor focus on company specific business exposure to the broader European region. While appropriate, we think that other macro variables, such as oil prices and currency, have also significantly impacted performance. Our multi-variable cross-sectional study accounts for these influences," the analysts stated.

Brendan McDermid | Reuters