UBS Makes Big Year-End Changes to Equity Focus List

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Bank of America

This true big money center bank has continued a methodical march back to financial health and also makes the list of top stocks at Jefferies. 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, online and mobile banking platforms, the company continues to open new markets and expand share.

The Merrill Lynch brokerage arm has continued to supply the bank with outstanding revenues and growth as well. 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 receive a 1.16% dividend. The consensus price target is $18.68. The stock closed on Wednesday at $17.84.

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Red Hat

This top technology stock also just made its debut on the UBS Q-GARP portfolio. Red Hat Inc. (NYSE: RHT) is the world’s leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training and consulting services.

While the UBS team acknowledges that Red Hat trades at a high valuation of 37 times 12-month forward earnings estimates, which is way above the average P/E for stocks in the Q-GARP list of about 19 times, they go ahead and add the company to the list because they think that Red Hat is well positioned to benefit from market share gains of the “open source” Linux operating system over time.

The company recently formed a partnership with once bitter rival Microsoft that would bring more flexibility to hybrid cloud enterprise environments. Specifically, the partnership allows cloud products running under the Linux operating system to integrate with Microsoft’s cloud computing platform Azure, a huge move after years of competition.

The consensus price target is $84.23. The shares ended trading on Wednesday at $80.53 apiece.

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Strong growth ideas that aren’t overvalued are always among the most sought after on Wall Street, and UBS has done its due diligence to look for large cap winners with plenty of room to run.