The S&P 500 followed up a strong 2023 performance with another quarter of solid gains to kick off 2024. Investor concerns over inflation, elevated interest rates and a potential economic slowdown continue to ease, and the S&P 500 has now logged back-to-back quarters of 10% gains for just the eighth time since 1950. In January, the S&P 500 also hit its first new all-time high in two years.
Heading into the second quarter of 2024, investors are optimistic that the market and the economy can maintain its positive momentum. However, the New York Fed’s recession probability model still estimates there’s a 58.3% chance of a U.S. recession within the next 12 months. In this volatile and unpredictable market, Bank of America recently compiled a list of their best stocks to buy now, which we profile below.
The 9 Best Stocks To Buy Now
Company (Ticker) | Forward P/E Ratio |
---|---|
20.9 | |
8.6 | |
13.2 | |
52.2 | |
12.3 | |
18.2 | |
50.8 | |
8.7 | |
18.4 |
Methodology
At the beginning of each quarter, Bank of America compiles a list of its highest-conviction stock ideas for the quarter based on fundamental analysis performed by its equity analyst team.
For each stock included on the list, analysts highlight unique catalysts that are likely to occur before the end of the quarter.
All stocks on the list are covered by Bank of America analysts, and the stocks chosen typically remain on the list throughout the quarter unless coverage is dropped or an analyst’s recommendation changes.
Bank of America’s top 10 U.S. ideas list contains both long ideas and short ideas, but the stock recommendations included in this list are the firm’s long ideas only.
How To Start Investing in Stocks Today
If you want to know how to start investing in stocks today, the key is to know how to start investing—period.
The first step in solving that puzzle is to create your investment plan. That requires you to answer three questions. First, what are your financial goals? Second, how much time do you have to achieve those goals? Third, how much anxiety in your portfolio can you stomach along the way?
The answer to this third question is known as your risk tolerance. It can be low, moderate or high. Your risk tolerance might indicate how much of your portfolio you want to dedicate to assets like stocks.
Investments tend to rise and fall over time. Some, like stocks, generally experience bigger ups and downs than investments like bonds and cash.
What To Look For When Buying Stocks
When buying stocks, it’s essential to do your research and consider the factors that can impact the performance of every company. Here’s what you need to watch out for:
- Fundamentals. Start by researching the company’s financial statements, such as their revenue, earnings, profit margins and debt-to-equity ratio. Figures like these help you determine the company’s overall financial health and whether its stock is a worthwhile investment.
- Industry trends. Understand trends in the company’s industry. Research reports, news and analyst predictions like the ones outlined above to get a better sense of where the industry is heading.
- Management. The experience and track record of a company’s management team can significantly impact its success. Look at their history of decision-making, leadership and overall strategy.
- Competitive advantage. Look for companies with a competitive advantage over their peers, such as strong brand recognition or unique intellectual property. This can give them an edge in the market and help the stock sustain appreciation and dividend payouts over time.
- Valuation. Assess whether the stock is overvalued or undervalued compared to similar companies in the industry. You can use metrics like price-to-earnings ratio, price-to-sales ratio and the price-to-book ratio to help determine the stock’s valuation.
- Dividend yield. Always look for stocks that offer a decent dividend yield, since over time dividend payments can make up for a significant part of your return on investment.
- Risks. Every investment comes with risks, and you need to assess the risks associated with the stock you might be purchasing. Look at factors like the company’s debt level, overall industry volatility and geopolitical risks that could impact the company’s performance.
Different Ways To Invest in Stocks
There are many different ways to invest in stocks. Some of the most common include:
- Investing directly in individual stocks on the stock market.
- Indirectly investing via traditional mutual funds and ETFs.
- Indirectly investing via closed-end funds.
- Investing indirectly through investment pools known as collective investment funds, which are often run by banks and trust companies and are primarily part of a workplace retirement plan or stock bonus plan.
- Investing indirectly through so-called derivatives, which are financial contracts—such as futures contracts—with values based on underlying assets.
– Aaron Bachman, managing director of Stewart Partners Global Advisory
Alternatives To Investing in the Stock Market
If your top priority is indeed growth of principal, there are alternative investments to the stock market. These kinds of investments include:
- Hedge funds
- Private real estate
- Collectibles
- Private equity
- Cryptocurrencies
- Private debt and venture debt
- Derivatives
- Commodities, such as oil, precious metals and agricultural products.
Alternative investments typically have two traits, says Alison Staloch, CFO of Fundrise. First, their investment returns often are not correlated with the publicly traded markets. They tend to zig when the exchanges zag. Second, their underlying investments are not bought and sold on the publicly traded markets either.
“And the best young private companies often grow much faster than once they go public,” Staloch says.
Looking For A Financial Advisor?
Via Datalign Advisory
Frequently Asked Questions (FAQs) on Buying Stocks
Do I need a broker to buy stocks?
You need a broker to buy stocks. A broker is a licensed professional who can buy and sell stocks on your behalf. It’s important to research and compare different brokers to find the one that best suits your needs, investment goals and price preference.
How can I buy stocks online?
You need to open an online brokerage account in order to buy stocks online. While some brokers are traditional brick-and-mortar firms, online brokerages offer commission-free trading and low fees.
How much should I invest in stocks?
How much to invest in stocks depends entirely on your personal financial goals and risk tolerance. A common rule of thumb is to invest between 5% and 10% of your total portfolio value in individual stocks and the rest in diversified funds.
How do stocks perform when interest rates are high?
It’s tough to generalize, but high interest rates make it more expensive for companies to borrow money, which can negatively impact their earnings and profitability. In addition, higher interest rates can also make bonds and other fixed-income investments more attractive to investors, drawing money away from the stock market.
However, it’s important to note that the relationship between interest rates and the stock market can be complex and there are many other factors that can impact stock performance, such as the overall economic environment, company-specific factors, and investor sentiment.
How do I pick the right stock?
The key to successful stock picking is simply to buy low and sell high. However, there are many ways to accomplish this goal. One way is to anticipate which stocks will increase their earnings.
Anticipating earnings increases is the goal of conventional stock picking in both fundamental analysis and technical analysis.
So, how can you pick the right stocks? David Blaylock, director of advice and compliance for RIA firm Origin, says, “Look for stock in companies that you understand enough to know whether they are headed for bigger future profits. And headed that way within your investment time frame.”