Analysts' 8 Top Stock Picks for Q4

·5 min read

Here are analysts' top stocks to buy in the fourth quarter.

The stock market's huge run off pandemic lows hit a bump in the road in the third quarter. After setting new record highs in August, the S&P 500 suffered its worst month since March 2020 in September. While some investors are concerned about rising interest rates and elevated inflation in the near term, most remain optimistic about rising vaccination rates and economic recovery down the road. Bank of America recently released its quarterly list of top stock picks for the next three months. Here are eight high-conviction stocks to buy that have bullish catalysts coming sometime in the fourth quarter.

APA Corp. (ticker: APA)

APA is a U.S. oil and natural gas producer. Oil and natural gas prices recently hit multiyear highs on concerns over near-term supply constraints and a rebound in global energy demand. Analyst Doug Leggate says APA's mix of domestic and international business is not fully valued by the market, in part due to its complexity. He says the company's balance sheet will improve over time, thanks to its unhedged production, which will help transition value from debt to equity and serve as a bullish catalyst. Bank of America has a "buy" rating and a $40 price target for APA stock, which closed at $26.22 on Oct. 14.

CNH Industrial NV (CNHI)

CNH Industrial manufactures farm and construction machinery, trucks and powertrains. Analyst Ross Gilardi says the agriculture industry is booming, and CNH should benefit from growing investment in precision farming. In addition, he says the spinoff of CNH's Iveco commercial vehicle business and the closing of its Raven acquisition could help unlock value given CNH's farm equipment business currently trades at a valuation discount to pure-play competitor Deere & Co. (DE). Gilardi says CNH's third-quarter earnings report in early November could be the stock's next bullish catalyst. Bank of America has a "buy" rating and a $25 price target for CNHI stock, which closed at $16.51 on Oct. 14.

East West Bancorp Inc. (EWBC)

East West Bancorp is a middle-market lender focused on banking trade between the U.S. and China. Analyst Ebrahim Poonawala says East West has a compelling risk-reward skew. He says the company could exceed its guidance of between 9% and 10% loan growth in 2021. Poonawala projects a 16% return on tangible common equity for the year, which he calls a "superior return profile." East West's earnings are also extremely sensitive to interest rates, and Poonawala says the stock's earnings multiple will likely expand ahead of the next Federal Reserve rate hike cycle. Bank of America has a "buy" rating and a $100 price target for EWBC stock, which closed at $82.08 on Oct. 14.

Extra Space Storage Inc. (EXR)

Extra Space Storage is a real estate investment trust that owns and operates self-storage properties. Analyst Jeffrey Spector says the storage industry is a relatively defensive way to invest in real estate. Specter says Extra Space is differentiated from other storage stocks because of its experienced management team, its third-party management platform and its high-quality customer demographics. He predicts that a stronger economy will help Extra Space exceed consensus earnings expectations. In addition, potential price hikes could serve as a bullish fourth-quarter catalyst. Bank of America has a "buy" rating and a $218 price target for EXR stock, which closed at $183.88 on Oct. 14.

Fox Corp. (FOXA)

Fox is a media company that owns the Fox Broadcast Network, 29 TV stations and several cable TV networks, including Fox News and Fox Sports. Analyst Jessica Reif Ehrlich says Fox has an unmatched portfolio of live sports and news assets and is the best-positioned media company to benefit from U.S. online sports betting. Fox has an ownership stake in high-growth sports betting platform FanDuel. Ehrlich says Fox's Tubi streaming service and Credible Labs financial technology subsidiary are also impressive growth sources. Bank of America has a "buy" rating and a $54 price target for FOXA stock, which closed at $42.45 on Oct. 14.

General Electric Co. (GE)

General Electric is an industrial conglomerate that produces jet engines, gas and wind turbines, and other industrial equipment. Analyst Andrew Obin says the combination of a recovery in the aerospace market and GE's operational improvements could be a powerful earnings growth driver. He projects that GE's industrial free cash flow, or FCF, will grow from an estimated $4.75 billion in 2021 to $7.5 billion in 2023. Obin says GE's third-quarter FCF numbers and updated 2021 FCF guidance could be bullish near-term catalysts for the stock. Bank of America has a "buy" rating and a $128 price target for GE stock, which closed at $102.37 on Oct. 14.

Medtronic PLC (MDT)

Medtronic is a medical device manufacturer focused on cardiovascular, surgical, neuroscience and diabetes-related equipment. Analyst Bob Hopkins says Medtronic shares trade at a steep valuation discount to many medical technology peers because of the company's inconsistent financial performance and its lagging growth rate. However, Hopkins says the company's new management team has it ready to deliver consistent results and potentially accelerate its 5% revenue growth rate. Near-term bullish catalysts include data from Medtronic's renal denervation clinical trials and European regulatory approval of its surgical robot. Bank of America has a "buy" rating and a $150 price target for MDT stock, which closed at $124.80 on Oct. 14.

Uber Technologies Inc. (UBER)

Uber Technologies is a popular mobile platform for ride-sharing and food delivery. Analyst Justin Post says the expiration of the Pandemic Unemployment Assistance program will ease Uber's driver shortage, which has weighed on total trips and take rates throughout 2021. Uber has hinted that the third quarter could be its first-ever quarter of break-even earnings before interest, taxes, depreciation and amortization, a potential bullish catalyst for the stock. Post says improving confidence in profitability should help alleviate Uber's current valuation discount relative to peers. Bank of America has a "buy" rating and a $64 price target for UBER stock, which closed at $47.28 on Oct. 14.

Bank of America's top stock picks for the fourth quarter:

-- APA Corp. (APA)

-- CNH Industrial NV (CNHI)

-- East West Bancorp Inc. (EWBC)

-- Extra Space Storage Inc. (EXR)

-- Fox Corp. (FOXA)

-- General Electric Co. (GE)

-- Medtronic PLC (MDT)

-- Uber Technologies Inc. (UBER)

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