If you want to buy low and sell high, Bank of America has some good news.
The bank’s Sell Side Indicator, which aims to measure the overall sentiment of Wall Street strategists, has fallen to its lowest level in five years.
“Wall Street’s consensus equity allocation has been a reliable contrarian indicator over time,” Bank of America strategists, led by Savita Subramanian, recently wrote in a recent note to investors.
“While the Sell Side Indicator does not catch every rally or decline in the stock market, the indicator has historically had some predictive capability with respect to subsequent 12-month S&P 500 total returns.”
The indicator isn’t flashing a ‘buy’ signal right now. But it hasn’t gotten this close since 2017.
The bank noted that when the indicator was at current levels or lower, the subsequent 12-month returns for the S&P 500 were positive 94% of the time with the median 12-month return being 22%.
If you want to bet on a bounce, here are two stocks that Bank of America finds particularly attractive.
Media and entertainment giant Walt Disney hasn’t exactly been a market darling of late. Shares are down 36% in 2022 and a whopping 41% over the last 12 months.
But its business is moving in the right direction.
In the fiscal quarter that ended July 2, Disney generated $21.5 billion of revenue, marking a 26% increase year over year.
The COVID-19 pandemic severely impacted Disney’s theme park business. But as society opens up, guests are starting to visit the iconic castles again.
For the quarter, revenue from Disney’s Parks, Experiences, and Products segment totaled $7.4 billion, up 72% from the year-ago period.
The company’s streaming services are enjoying strong momentum as Disney+ gained 14.4 million subscribers. That brought the service’s total subscriber base to 152.1 million. Total subscriptions across Disney’s direct-to-consumer product offerings now exceed 221 million when factoring in ESPN+ and Hulu.
Bank of America analyst Jessica Reif Ehrlich has a ‘buy’ rating on Disney and a price target of $127. Since the company currently trades at $99.70 per share, the price target implies a potential upside of 27%.
EQT is a natural gas producer in the Marcellus and Utica Shales in the Appalachian Basin.
Given how much natural gas prices have gone up this year, it’s no surprise that EQT’s business is firing on all cylinders.
The company just reported earnings. In Q3, it achieved an average realized price of $3.41 per thousand cubic feet of natural gas equivalent, marking a 46% increase from the $2.33 per Mcfe it earned in the year-ago period.
EQT also churned out $591 million of free cash flow for the quarter, a huge improvement from the $99 million generated in Q3 2021.
The company is returning more cash to investors. Management recently doubled the company’s share repurchase authorization to $2.0 billion.
Unsurprisingly, EQT has received a lot of investor attention this year — shares are up 83% so far in 2022.
Bank of America expects the uptrend to continue. The bank has a ‘buy’ rating on EQT and recently boosted its price target to $74 — representing a potential upside of 85% from where the stock sits today.
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