It can be fun to trade meme stocks, speculate on penny stocks and take a gamble on high-risk stocks that could be 10-baggers in a couple of years. However, investors buying stocks for their 401(k) or other retirement accounts should be looking for an entirely different type of investment.
The best 401(k) stocks are stocks that are extremely high-quality, low-risk stocks that are reliable and well-established in their respective markets. Retirement investors should be looking for blue chip stocks with strong balance sheets and businesses.
Here are the only nine S&P 500 stocks that have Bank of America Buy ratings and A+ quality rankings from S&P Global Market Intelligence.
UnitedHealth Group Inc UNH
UnitedHealth is one of the largest Managed Care Organizations (MCOs). Analyst Kevin Fischbeck says UnitedHealth's scale and diversity provide safety for investors and competitive advantages over other companies, and its Optum business is a unique, long-term growth opportunity. He says there is meaningful upside to consensus UnitedHealth earnings estimates.
Bank of America has a Buy rating and $574 price target for UNH stock.
Home Depot Inc HD
Home Depot is one of the leading home improvement retailers in the U.S. Analyst Elizabeth Suzuki says inflation is actually boosting Home Depot's top-line growth, and the company has successfully managed rising costs by maintaining impressive margins. Rising interest rates may cool off the housing and home improvement markets in 2022 and beyond, but Home Depot has a well-established track record of execution that should reassure long-term retirement investors.
Bank of America has a Buy rating and $440 price target for HD stock.
Mastercard Inc MA
Mastercard is one of the world's largest credit card and digital payments companies. Analyst Jason Kupferberg says Mastercard has several growth opportunities, including traditional payment flows, buy-now-pay-later and cryptocurrency. In the near-term, a pickup in cross-border travel should provide a bullish catalyst as the world recovers from the pandemic, a dynamic that Kupferberg says could drive upside for Mastercard earnings in 2022 and 2023.
Bank of America has a Buy rating and $416 price target for MA stock.
Thermo Fisher Scientific Inc. TMO
Thermo Fisher Scientific is the largest and most diversified life sciences company, with a comprehensive product portfolio of analytical instrumentation, lab equipment, consumables, software and services for research and diagnostics. Analyst Derik de Bruin says acquisitions of complementary companies, process improvement initiatives and expanding operations in emerging markets will help Thermo Fisher deliver annual EPS growth in the now teen percentage range over the next several years.
Bank of America has a Buy rating and $700 price target for TMO stock.
Texas Instruments Incorporated TXN
Texas Instruments supplies semiconductor components, including digital signal processors and high-performance analog components. Analyst Vivek Arya says Texas Instruments is among the highest-quality analog semiconductor stocks. He says the company has a long track record of market share gains, free cash flow generation and profitability even during economic downturns. He says the company's near-term capex pain could generate longer-term market share gain.
Bank of America has a Buy rating and $200 price target for TXN stock.
Lowe`s Companies Inc LOW
Lowe's is a leading home improvement retailer and Home Depot's primary competitor. Suzuki says home improvement spending will continue to decelerate in the near-term following two record-setting years in 2020 and 2021. However, she said 2022 will still see positive growth given persistent renovation demand and a bloated backlog of professional projects. In addition, she says Americans and Canadians continue to spend more money at home than before the pandemic.
Bank of America has a Buy rating and $292 price target for LOW stock.
Northrop Grumman Corporation NOC
Northrop Grumman is a leading U.S. defense contractor. Analyst Ronald Epstein projects the U.S. defense budget could rise to between 3.5% and 4% of GDP, or around $800 billion, in fiscal 2023. For contractors like Northrop, the defense budget is the most important factor in their earnings and revenue stability, making them stable, reliable investments even during economic downturns. Epstein says the U.S. defense budget will continue to expand in the longer term, likely exceeding $900 billion by 2025.
Bank of America has a Buy rating and $540 price target for NOC stock.
General Dynamics Corporation GD
General Dynamics is another leading defense contractor that will benefit from the potential defense spending fallout following the recent Russian invasion of Ukraine. General Dynamics shares are already up 9.1% in a weak market in 2022, and Epstein sees more long-term upside ahead as defense budgets in the U.S. and Europe rise. He says continued global geopolitical conflict could push defense stock valuations from a 20% to 30% discount to the S&P 500 before the invasion, to a 20% to 30% premium to the market in the longer term.
Bank of America has a Buy rating and $280 price target for GD stock.
Domino's Pizza, Inc. DPZ
Domino's Pizza is the leading global pizza delivery company, with more than 16,000 global locations. Analyst Sara Senatore says Domino's will continue to benefit from the fast-growing pizza market and has tremendous first-mover advantages and both U.S. and international expansion opportunities. In addition, she says labor shortages should improve throughout the remainder of the year, which will boost revenue growth as Domino's works to further expand its menu.
Bank of America has a Buy rating and $550 price target for DPZ stock.
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