Here are Bank of America's top short-term trades for the second quarter

Published Fri, Apr 1 20221:05 PM EDT

Wall Street kicked off 2022 on the wrong foot, with the S & P 500 posting its first quarterly loss in two years amid worries over rising inflation, a war in Ukraine and the bond market flashing signals that a recession could be coming . So, as the second quarter begins and investors look to start fresh, Bank of America laid out a list of stocks it thinks are well-positioned to weather the current climate — at least in the short-term. The bank shared its top stock picks for the new quarter Friday, which include a slew of companies across sectors it thinks can rally even against this uncertain macro environment. To be sure, many of the first quarter's woes will persist as the Federal Reserve hikes rates and geopolitical tensions continue. Bank of America's picks aren't insulated from these risks, but the bank thinks they are better-positioned due to a range of "company-specific catalysts." Here are some of the names that made the list: AMD Shares of semiconductor maker Advanced Micro Devices may have fallen 24% this year, but Bank of America thinks the stock can make a comeback. Chip makers such as AMD have struggled amid supply chain disruptions and analysts forecast heightened risks, including dwindling demand for consumer products if a recession hits. AMD's shares plummeted Thursday after Barclays downgraded the stock and warned that some of the company's key markets could see slowdowns. However, Bank of America likes the company's recently closed acquisition of Xilinx and thinks the chipmaker is well-positioned to grab a growing portion of the PC market. "AMD is one of the few semiconductor companies that can grow sales at a 15%+ pace and EPS at a 20%+ pace towards $6 in FY24, with bull case of 20% sales growth and earnings power getting towards $7-$8 over time," analysts wrote. The bank has a price target of $190 per share on AMD, implying an upside of nearly 74%. Lululemon On the consumer front, Bank of America likes Lululemon , which benefitted from the shift to comfortable apparel during Covid-19 lockdowns. Shares of the retailer have dipped 6% this year, but analysts said the athletic apparel company is more than a "pandemic beneficiary" and will thrive as consumers return to work. The bank's price target implies 23% upside from Thursday's close price. "This will be one of the rare retailers to see margin gains this year – most are seeing pandemic recovery gains unwind," Bank of America said. Lululemon recently announced a $1 billion stock buyback program, which sent shares surging despite a miss on revenue for the recent quarter. The company also issued better than expected full-year guidance, including 20-22% revenue growth — which Bank of America calls a "nice upside surprise." Alaska Air Bank of America thinks Alaska Air shares can do well going forward, as the travel industry begins to recover — especially after the airline outlined $400 million in revenue opportunities at a recent investor day. Analysts also think Alaska Air is well-positioned to control costs and like the company's ability to hedge fuel, a "competitive advantage" they say can help it overcome cost pressures. "ALK's strong balance sheet position, combined with its fuel hedges, provides the carrier the option to be more aggressive in its capacity plans and take advantage of the strong demand environment," the bank wrote. Shares of Alaska Air have gained 11% this year and could jump about 21% from Thursday's closing level, based on the bank's $70 price target. A CNBC Pro screen earlier this week also found that analysts on average expect the good times to continue for the airline. Valero Energy Valero Energy also made the bank's list, with analysts noting they think that oil refiners are reaching a new "Golden Age," as gasoline prices surge across the country due to higher oil prices. "Within the US Independent Refiner peer group, we believe VLO is the best positioned to exploit a call on refining margins," analysts wrote, calling the company a "pure-play refiner." Valero's stock has already surged 36% this year and could offer investors a potential 33% return, based on Bank of America's 12-month price target.

A Lululemon Athletica store in Pasadena, California.

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So, as the second quarter begins and investors look to start fresh, Bank of America laid out a list of stocks it thinks are well-positioned to weather the current climate — at least in the short-term.