Bank of America Says the S&P 500 Will Hit a New Record High in 2024 — Here Are 2 Stocks to Play That Bullish Sentiment

This has been a good year for stocks, no doubt about that. The S&P 500 has gained 19% year-to-date, after a gangbusters November, and the outlook for December, while more moderate, remains positive.

The markets have made these gains despite a strong set of headwinds, including the Federal Reserve’s turn to a policy of aggressive monetary tightening and interest rate hikes; the ongoing war in Ukraine; and now the flare-up of war in the Middle East. This stock rally is showing real strength, and the Street is now taking seriously the possibility of a ‘soft landing’ case, with inflation falling to the Fed’s target rate of 2% in the coming year.

That’s fueling some improvement in investor sentiment – and a brighter outlook from the experts. Writing from Bank of America, market strategist Savita Subramanian says in a recent note, “We are past maximum macro uncertainty… We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted to higher rates and inflation.”

Putting some numbers to the sentiment, Subramanian is predicting that the S&P will hit 5,000 during 2024 – a new record high, and some 9.5% above its current level.

That would make a gain worth pursuing, and the Bank of America analysts are doing just that – selecting stocks likely to ride a bullish sentiment wave. Here are two of them, along with the latest stats from the TipRanks database and comments from Bank of America’s stock experts.

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Arrowhead Pharmaceuticals (ARWR)

First up on our list of Bank of America picks is Arrowhead Pharma, a medical research company working with the RNA interference, or RNAi, mechanism to target specific genes involved in the expression of rare and/or intractable diseases. The company has a wide-ranging portfolio of RNA chemistries, based on various modes of delivery, and has used these to create a series of RNAi-based therapeutic agents.

The advantage here comes from the action of RNAi; the mechanism is present in all living cells and inhibits the expression of specific genes, preventing or altering the production of proteins related to those genes. The high specificity of the mechanism makes it uniquely suitable for the treatment of genetically-based diseases.

Following this path, Arrowhead has developed a proprietary drug development platform, dubbed TRiM, or Targeted RNAi Molecule, to use ligand-mediated delivery for tissue-specific targeting from a structurally simple therapeutic agent. The company has built up an extensive pipeline of drug candidates, targeting conditions as varied as NASH and other liver diseases, gout, hepatitis, myotonic dystrophy – it’s a long list, as the company has 15 active research tracks ongoing.

The most advanced pipeline project is plozasiran, a potential treatment for the cardiac condition hypertriglyceridemia. The drug candidate is at the late stage of clinical trials, and the company recently released positive clinical data from the Phase 2 SHASTA-2 and MUIR studies. The related drug, zodasiran, is the subject of the ARCHES-2 study; Arrowhead released data on this at the same time as plozasiran releases.

For Bank of America analyst Jason Gerberry, this company’s extensive pipeline, including some solid late-stage assets, adds up to a sound investment. Laying out the details, Gerberry writes, “In our view, ARWR has an attractive mix of early to late programs with significant upside potential. We view the current stock valuation as an attractive entry-point given Arrowhead’s progress in developing pulmonary-based RNAi therapies, establishing a potential first-mover advantage in large markets. We see several potential 2024 catalysts that will help validate plozasiran (for cardiovascular disease) and biomarker data for ARO-RAGE, the lead respiratory program. While the 4Q24 cash runway creates a stock overhang, we see post quarter sell-off as overdone given ’24 clinical updates + ability to monetize certain platform assets to extend cash runway in a non-dilutive manner.”

Taken all together, these comments supported Gerberry’s Buy rating on ARWR stock, and his $29 price target implies ~24% one-year upside potential for the shares. (To watch Gerberry’s track record, click here)

The Bank of America view may turn out to be the conservative look at Arrowhead – the stock’s Strong Buy consensus rating is based on 9 recent analyst reviews that include 7 Buys and 2 Holds. The shares are trading for $23.43, and their $49.38 average price target suggests the stock will gain an impressive 110% in the coming year. (See Arrowhead stock forecast)

Oneok, Inc. (OKE)

From biopharma, we’ll move over to the energy sector. Oneok is based in Tulsa, Oklahoma, in close proximity to some of the nation’s richest energy-producing basins and works in the natural gas midstream sector. The company provides transport services to gas producers from Montana down to the Texas Gulf Coast and owns one of North America’s premier natural gas liquids (NGL) systems.

A look at the map shows that Oneok’s network is centered in the company’s home state, and the largest part of the system lies in Oklahoma, Kansas, and Texas. Branches of Oneok’s operations run northwest toward the Rockies and northeast toward the Great Lakes. The network is composed of gathering, transport, fractionation, processing, and storage assets. In addition, through a recent acquisition, Oneok now has a foothold in the movement of refined products.

The acquisition was announced earlier this year. Oneok entered an agreement to acquire Magellan Midstream Partners, and that agreement was completed this past September. Magellan’s network became part of Oneok’s, and the combined systems total more than 25,000 miles worth of pipeline. The acquisition transaction was valued at approximately $18.8 billion; each Magellan shareholder received $25 in cash plus 0.667 shares of OKE for every Magellan share held.

The Magellan deal was completed at the end of Q3, and Oneok reported its third-quarter results one month later. The quarterly release for 3Q23 showed an adjusted EBITDA of just over $1 billion, up 11% year-over-year. The company’s diluted earnings per share came to 99 cents; this was up 3 cents from the prior-year period but missed the forecast by 6 cents per share.

Analyst Neel Mitra covers OKE stock for Bank of America, and in his view, the Magellan transaction and the new assets it brings to Oneok’s network are the key points that should interest investors. Mitra writes of this stock, “We think the market is underappreciating the synergies and FCF step-up from the merger with MMP. OKE now owns both NGL and refined products pipe systems with pricing power and high FCF conversion. We think the combination adds a conservative $750mm of annualized cost ($150mm) and commercial synergies ($600mm) through YE26, $2.2bn of nominal cash tax savings through ’27, and a lower OKE cost of capital with MMP’s lower beta, demand-pull refined products system.”

The analyst goes on to rate OKE shares a Buy, while his $83 price target points toward a one-year gain of ~20%. (To watch Mitra’s track record, click here)

Overall, we’re looking here at a stock with a Moderate Buy consensus rating, based on 9 recent analyst reviews that break down 5 to 4 between the Buys and the Holds. The average target price of $75.78 implies a modest upside of 9% from the current trading price of $69.28. (See Oneok stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.