With the market experiencing a huge jump in volatility, one of the best things for investors to consider is a rotation in their portfolios to stocks that have value stock characteristics. Even though the Federal Reserve probably raises rates in December, stocks will remain a far better investment in 2016 than bonds. Value stocks may have the potential to outperform traditional growth, especially if the current volatility remains elevated.
Each week we cover the new value calls from the analysts at Jefferies and, increasingly, some of the calls may look surprising, as some solid blue chip companies are becoming so cheap on a multiple basis they are ending up in the value arena. This is the best of both worlds for investors, when large-cap growth companies become inexpensive enough to have a value call.
Here are three of this week’s value stocks to buy from Jefferies. All are rated Buy.
Bank of America
This true big money center bank has continued a methodical march back to financial health. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally.
Operating 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms, Bank of America continues to open new markets and expand share, which Jefferies feels it excels in. The Merrill Lynch brokerage arm has continued to supply the bank with outstanding revenues and growth.
The Jefferies team met with CEO Brian Moynihan earlier this fall and came away feeling good about the overall outlook for the bank. With the potential for strong commercial lending and credit card originations, and trading at just under 11 times 2016 estimated earnings, the stock makes good sense now.
Bank of America investors are paid a 1.16% dividend. The Jefferies price target for the stock is $18, and the Thomson/First Call consensus target is $18.38. The stock closed on Monday at $17.43.