Recent market dynamics have sent mixed signals to investors, culminating in a robust earnings season for the first quarter of 2024 that exceeded expectations. This comes after a somewhat tumultuous April where the S&P 500 suffered a 4% loss, breaking a five-month streak of gains. However, May ushered in a rebound, echoing the resilient nature of financial markets. Amid these fluctuations, the Federal Reserve has taken a stance to maintain higher interest rates for an extended period, although a potential rate cut might still be on the table for late 2024. Amid these economic currents, Bank of America’s leading strategist, Savita Subramanian, remains optimistic about achieving a “soft landing” for the economy, anticipating a 5.5% rise in the S&P 500 to reach 5,400 by year-end.
Bank of America is championing this bullish outlook by highlighting two notable stocks, which have also earned ‘Strong Buy’ consensus ratings from other Wall Street analysts. Both stocks represent distinct sectors and possess unique growth drivers as detailed below.
KKR & Co. (KKR) is a global powerhouse in finance and asset management, boasting a diversified portfolio that stretches across private equity, credit strategies, and real estate. As of the end of March 2024, KKR reported a significant 13% increase in assets under management year-over-year, reaching $578 billion. This growth was supported by $31 billion in new capital raised in the first quarter alone. Furthermore, KKR’s earnings for the first quarter were robust, with adjusted net income of $864 million, surpassing expectations. Bank of America’s analyst Craig Siegenthaler views KKR as a compelling investment opportunity, highlighting its potential for significant earnings growth as market conditions improve. He sets a price target of $134 for KKR, indicating a substantial upside potential of 41% from its current trading price.
Avis Budget Group (CAR), a leader in the global car rental industry, operates an extensive network through various well-known brands such as Avis, Budget, Payless, and Zipcar. Despite challenges in the used car market that have pressured the company financially, Avis Budget has maintained resilience in its core rental operations. In the first quarter of 2024, the company reported a 5% increase in rental days year-over-year and exceeded revenue expectations with $2.6 billion. Bank of America’s John Babcock remains positive on the stock, citing its strong operational performance and competitive edge over peers. He recommends a ‘Buy’ rating with a $140 price target, suggesting a 21% upside.
Key Takeaways: Both KKR and Avis Budget showcase strong fundamentals and growth potential in their respective sectors. KKR’s diverse asset management portfolio and strong fundraising abilities position it well for future growth, especially in a recovering market environment. Avis Budget, on the other hand, demonstrates resilience amid sector challenges, with potential for significant recovery as market conditions stabilize.
Conclusion: As investors navigate through mixed market signals and anticipate the Federal Reserve’s next moves, the insights provided by Bank of America’s analysis suggest focusing on companies with robust fundamentals and strategic growth plans. KKR and Avis Budget represent such opportunities, each poised for significant gains backed by strong management and market positioning. Investors would do well to consider these stocks as potential additions to their portfolios, aligning with Bank of America’s bullish stance for the near future.
