The breathtaking run in technology stocks has dominated the financial headlines this year since the massive February and March sell-off. In fact, the 10 biggest stocks in the S&P 500 from a market capitalization standpoint, which include the gigantic technology leaders, now represent a stunning 29% of the index. The Nasdaq is up 23% and has set 32 records this year.
Many strategists across Wall Street have become concerned over market concentration, and while from a valuation perspective it’s nowhere near the absurd levels of the dot-com era, from a market concentration perspective it could be a bubble, with the Nasdaq 5 (Facebook, Apple, Amazon, Microsoft and Google) representing nearly 23% of the S&P 500.
We decided to screen the BofA Securities US 1 list of the firm’s highest conviction stock ideas, looking for quality companies that have lagged the huge moves of the tech giants and offer solid upside potential but are perhaps less vulnerable to a massive tech-driven sell-off. While all five are outstanding ideas for investors, it’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bristol-Myers Squibb
This remains a solid pharmaceutical stock to own long term. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
The company reported strong second-quarter results that were largely ahead of Wall Street consensus, given the ongoing recognition of Celgene revenue. Bristol-Myers bought Celgene last year in a massive $74 billion acquisition. The posted quarterly earnings of $1.63 per share exceeded the Wall Street consensus estimate and were higher than the per-share earnings reported in the same period a year ago.
Shareholders receive a very solid 2.91% dividend. The BofA Securities price target for the shares is $80, while the Wall Street consensus target is $72.08. Bristol-Myers Squibb stock closed trading Monday at $61.82 a share.
Citigroup
Shares of this top bank are trading at the lowest levels since 2016. Citigroup Inc. (NYSE: C) has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. It provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management.
Trading at a still very cheap 7.2 times estimated 2020 earnings, this company looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.
Citigroup investors receive a 3.88% dividend. BofA Securities has a $74 price target, and the posted consensus price objective is lower at $69.71. Citigroup stock closed trading at $52.86 on Monday.
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