Stocks are off to a hot start to the year, and Bank of America analysts think some of the buy-rated names in their coverage universe could carry that momentum through the rest of 2023. The S&P 500 is up more than 5% in January, on pace for its best start to a year since 2019. Slower inflation metrics and China’s reopening are two contributing factors that drive gains in broad market indices in the early part of the year. Such a strong start could be a promising sign of what is to come. CFRA Chief Investment Strategist Sam Stovall noted that after a positive January, the market continued to rise for more than 85% of the rest of the year. During that time, the S&P 500 has had an annual gain of about 11.5%, according to data going back to World War II. To be sure, the question remains of how much the Federal Reserve will raise interest rates to fight inflation, which is still more than double the central bank’s target rate of 2%. Still, Bank of America asked its analysts to break down their top picks for 2023. According to them, these companies are poised to do well this year. The firm said it compiled the list through its senior research analysts and an “informal survey” spanning various sectors. Here’s a look at the five stocks that made Bank of America’s list: Raytheon Technologies Raytheon Technologies, the combined entity resulting from the merger of Raytheon and United Technologies, was selected for its “significant breadth and depth” in aerospace and defense. Industry. “There are upside risks if commercial aerospace and commercial aviation jet recoveries are better than expected, earnings could be better than our estimates,” Bank of America noted. “Downside risks for PO are natural business cycles or a decline in commercial aviation due to an external event such as a terrorist attack or pandemic.” Bank of America has a price target of $120 per share, up nearly 20% from Monday’s close. Raytheon shares are up 10% over the past 12 months. However, the stock is down about 2 percent so far. Amazon Tech giant Amazon also made the list, with Bank of America noting that it is “well-positioned to capitalize on the global growth of ecommerce and other secular trends such as cloud computing, online advertising and connected devices.” The firm set its price target at $135, which is an upside of 34% from Monday’s close. Amazon shares are up nearly 22% since the start of 2023. However, in 2022 they have decreased by almost 50%. AMZN 1Y Mountain Amazon made the list last year, thanks to Deckers footwear designer and retailer Deckers’ strong brand portfolio. Hoka and Ugg shoe brands. “We believe DECK has significant EPS growth opportunity due to rapidly growing HOKA brand awareness, modest share gains from UGG and share repurchases,” wrote analyst Christopher Nardone. Bank of America in November highlighted Hoka as the “crown jewel” for Deckers, projecting revenue for the ring shoe brand to reach $2.2 billion by fiscal year 2025. Decker shares have gained 5.25% so far in 2023 and 31.19% in 2023. Last 12 months. Domino’s Pizza was chosen by Bank of America, the world’s largest pizza delivery company, because of its promising growth potential. “We believe DPZ will continue to be a beneficiary of the fast-growing pizza sector with its large scale, first mover advantages, and long growth runway in the United States and internationally,” analyst Sarah Senatore wrote. Domino’s shares have fallen nearly 22% over the past 12 months due to high cost struggles and driver shortages. Ferrari Luxury sports car maker Ferrari is “a unique asset, with resilient financial performance, significant intangible brand value, and a true luxury position,” according to Bank of America. The firm highlighted Ferrari’s brand value as an important driver of revenue outside of vehicle sales. Analyst John Murphy also noted that the automaker’s “balanced strategy of volume growth, price increases, and new model introductions over our forecast period should increase external revenue and earnings.” Shares in Ferrari are up nearly 13% this year and 14% over the past 12 months. —CNBC’s Michael Bloom contributed to this report.
