Stocks are off to a hot start for the year, and Bank of America analysts think some buy-rated names in their coverage universe can 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. Slowing inflation metrics and China’s reopening are two contributing factors driving the growth in the broader market index in the early part of the year. Such a strong start could be a promising sign for what’s to come. CFRA chief investment strategist Sam Stovall noted that, following a positive January, the market has continued to rise for the rest of the year more than 85% of the time. Those times, the S & P 500 has averaged an annual gain of about 11.5%, according to data going back to World War II. To be sure, the question still remains as to how much the Federal Reserve will raise interest rates in order to combat 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 that it compiled its list through an “informal survey” of its senior research analysts and spans across various sectors. Take a look at five of the stocks that made Bank of America’s list: Raytheon Technologies Raytheon Technologies, which is the combined entity resulting from the merger of Raytheon and United Technologies, was selected given its “significant breadth and depth” across the aerospace and defense industry. “Upside risks are if the commercial aerospace and business aviation jet recoveries are better than expected, earnings could fare better than our projections,” Bank of America noted. “Downside risks to PO are a downturn in commercial aviation due to the natural business cycle or an exogenous event such as a terrorist attack or a pandemic.” Bank of America has a price target of $120 per share, implying upside of about 20% from Monday’s close. Raytheon shares have grown 10% in the past 12 months. However, the stock has dipped almost 2% year to date. Amazon Tech giant Amazon also made the list, with Bank of America noting 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 objective at $135, which implies upside of 34% from Monday’s close. Amazon shares have rallied almost 22% since the start of 2023. However, they fell nearly 50% in 2022. AMZN 1Y mountain Amazon in last year Deckers Footwear designer and retailer Deckers made the list in part due to its strong brand portfolio, which includes the Hoka and Ugg shoe brands. “We believe DECK has significant EPS growth opportunity due to rapidly rising 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, estimating that the running shoe brand’s revenue will grow to $2.2 billion by fiscal 2025. Decker’s shares have gained 5.25% thus far in 2023, and a whopping 31.19% in the last 12 months. Domino’s Pizza The world’s largest pizza delivery company was chosen by Bank of America due to its promising growth potential. “We believe DPZ will continue to be a beneficiary of the fast growing pizza segment with its large scale, first mover advantages, and a long growth runway in the US and internationally,” analyst Sara Senatore wrote. Domino’s shares have fallen approximately 22% over the past 12 months in part due to higher cost struggles and driver shortages. Ferrari Luxury sports car manufacturer Ferrari “is a unique asset, with resilient financial performance, significant intangible brand value, and a true luxury status,” according to Bank of America. The firm underlined Ferrari’s brand value as a significant 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 drive outsized revenue and earnings growth.” Ferrari shares have jumped about 13% this year and 14% in the past 12 months. —CNBC’s Michael Bloom contributed to this report.
