Here are Bank of America's top long and short ideas for the first quarter

Published Tue, Jan 2 202411:00 AM ESTUpdated Tue, Jan 2 202411:16 AM EST

As the new year kicks off, Bank of America is laying out some of its top long and short ideas for the first quarter. Stocks are coming off a breathtaking year that saw a return to growth-oriented names after a gruesome 2022. The S & P 500 rallied 24% while the Nasdaq Composite surged 43% for its best year since 2020 as Wall Street bet big on artificial intelligence. Here are some of the firm's top picks: Bank of America is optimistic on Humana in the new year despite some market concerns about the health insurance company's path to $37 in earnings per share in 2025. The firm's price target implies 40% upside from Friday's close, with analyst Kevin Fischbeck viewing a potential merger with Cigna as "validation of the core growth story ahead." On the financial front, Bank of America projects about 17% upside for shares of Citigroup as Wall Street obtains greater visibility into the company's core earnings trajectory. Recent cost-cutting and efficiency measures should also boost investor confidence and offer a potential tailwind for the stock, wrote Ebrahim Poonawala. "We believe Citigroup (C) shares offer a compelling risk/reward given the potential for idiosyncratic EPS levers 'self-help' that should lead to an improved ROTCE (return on tangible common equity) on the back of CEO Jane Fraser's actions to transform the franchise," he wrote. Automotive seating company Lear and railroad operator Union Pacific also made Bank of America's list of long ideas for the first quarter. Meanwhile, the Wall Street firm highlighted underperform-rated Tractor Supply as a potential short idea for the first quarter. Analyst Jason Haas recently downgraded shares, citing a post-pandemic reversion in the farming industry, a deflationary commodity cycle and declining herd sizes. "Although the company is well positioned in the farm & ranch store industry, we're concerned that soft discretionary demand and deflation will suppress earnings growth in the near-term," he said. The firm's $171 price target implies 20% downside from Friday's close. — CNBC's Michael Bloom contributed reporting.