Top Wall Street firms go about covering companies with their research departments in many different ways. Some use a top-down approach, which involves looking at big picture economic factors to make investment decisions. Bottom-up investing looks at company-specific fundamentals, like financials, and focuses on the analysis of individual stocks, de-emphasizing the significance of macroeconomic cycles and market cycles.
Almost all the firms we cover at 24/7 Wall St. also use quantitative research, which is used to quantify the company by way of generating numerical data or data that can be transformed into usable statistics. The analysts at BofA Securities have their Growth 10 portfolio, which is quantitatively generated and based on the proprietary BofA Securities model, rather than consensus earnings surprise models plus additional screening criteria.
With the second quarter underway, the Growth 10 team is making some big changes to the portfolio. Here we cover those changes plus present three additional companies that have the highest five-year earnings growth potential. While all are rated Buy at the firm, it is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
The Growth 10 analysts have remove Advance Auto Parts Inc. (NYSE: AAP) and Dexcom Inc. (NASDAQ: DXCM), both of which have had stellar runs over the past year. Both remain Buy rated at BofA Securities. The new additions to the portfolio are Freeport-McMoRan Inc. (NYSE: FCX) and NRG Energy Inc. (NYSE: NRG).
Freeport-McMoRan is one of the top picks at BofA Securities in its sector for 2021. The company is the world’s largest publicly traded copper and moly producer, as well as the eighth largest gold producer. Its key operating and development assets are in Indonesia, North America, South America and Africa.
Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects, and it clearly would benefit from stronger demand and higher prices for industrial commodities.
Investors receive just a 0.86% dividend. The BofA Securities price target for the shares is $40. The Wall Street consensus target is $36.98. Freeport-McMoRan stock closed on Tuesday at $35.01 a share.
NRG Energy stock has made a nice run off the lows, and it is also on the firm’s US 1 list of high-conviction stock picks. This integrated independent power producer owns and operates 27 gigawatts (GW) of conventional and renewable generating capacity in the United States and serves 3 million retail customers in Texas and the northeastern United States.