BOA Double Upgrade-Energy BofA Securities U.S. quantitative strategist Savita Subramanian – one of the sell-side pundits I follow most closely – has released her year-ahead 2021 investor guide (my emphasis),
“Our 2021 year-end target for the S&P 500 is 3800 (+6% upside). The recovery is intact and the world likely re-opens in the 2H, but a lot of optimism is priced in already on vaccine/recovery. Vaccine execution risk, delayed fiscal stimulus and longer lockdowns are risks. …a few themes support stocks: the S&P 500 dividend yield is 3x the 10-year yield, and S&P 500 dividends are set to increase in 2021… Our top two sectors are unapologetically cyclical and value-focused: Financials and Energy (which we double-upgrade from underweight). Technology and Health Care offer neglect and growth at a reasonable price. We are underweight Staples, Real Estate and Comm.”
Ms. Subramanian explained her double-upgrade of U.S. energy stocks in point form thusly,
“Deep value / cyclical inflation beneficiary. ESG energy purge behind us; EPA [Environmental Protection Agency] policies matter less than supply/demand. FCF [free cash flow] focus over production focus. Highest dividend yield of all 11 sectors, but may be at risk if oil prices remain weak. "
“@SBarlow_ROB BoA 2021 U.S. investment guide: “Our top two sectors are unapologetically cyclical and value-focused: Financials and Energy” – (research excerpt) Twitter