When every rally attempt fails, the big risk-on day Thursday aside, market veterans know that it is likely that the path of least resistance for the stock market is lower. Thursday’s preliminary reading of negative gross domestic product for the first quarter (the first such print since the second quarter of 2020) is a clear sign that things could get worse before they get better.
The highest inflation in 41 years, the ongoing war between Russia and Ukraine, supply-chain issues and a host of additional woes continue to pressure the equity markets. Many investors are getting nervous, especially with the Nasdaq already dipping in and out of bear market status.
We decided to screen the Goldman Sachs Conviction List, looking for ideas for concerned investors that have a defensive posture and pay solid dividends. The reason they make sense now is that they are the very best ideas from the top investment bank, not just on Wall Street but around the world.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bank of America
Bank of America Corp. (NYSE: BAC) posted very solid first-quarter results, and rising interest rates are welcomed by banks. The company 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. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
Bank of America has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Banks almost regardless of size, are a solid idea as the potential for higher net interest income (NII) on portfolio loans to homeowners, farmers and small business owners. NII is one of the strongest tailwinds provided to financial firms in a rising-rate environment, as they can achieve better returns on their cash balances while achieving higher rates of returns from customers who come in for loans.
Bank of America stock investors receive a 2.32% dividend. The Goldman Sachs target price of $47 is less than the $49.16 consensus target but well above Thursday’s closing share price of $36.81.
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