Bank of America has a favorite group of stocks to ride out the market turmoil
For investors preparing their portfolios for recession risks, one group of stocks in particular is attracting favorable attention from Bank of America analysts. Health care is "well-positioned" to weather market turmoil, according to a recent note. On Thursday, markets declined sharply with the Dow Jones Industrial Average recently losing more than 1,000 points, or 3.2%. The S & P 500 and Nasdaq Composite fell 3.6% and 4.8%, respectively. Still, health-care stocks can offer investors "growth, defense and yield" at a reasonable price, Bank of America analysts said. The sector has outperformed the S & P 500 index in 2022, having declined 8% year to date through Tuesday, against the broader market's 12% loss. "Our U.S. Regime Model is in Late Cycle, during which HC has enjoyed the strongest alpha of all sectors," read the note, referring to health care. "HC also tends to fare well in downturns/recessions, and 2023 recession risks have risen."' Bank of America analysts like health-care stocks because they're trading at a "near-record" discount to the S & P 500. Concerns around greater regulatory risk have weighed on health-care stocks but those fears may now be fully priced in and "overblown," according to analysts. The sector is also second only to technology based on annualized EPS growth since 1986. It's also offering higher yields than the S & P 500, a "rare" occurrence that has only happened three times in almost 40 years. Several health-care names are already heavily overrepresented in investor portfolios. However, Bank of America has its own group of favorite health-care stocks, recently highlighting Humana, Thermo Fisher Scientific , Boston Scientific , Stryker Corporation and CVS Health. Here are health-care names beloved by investors: Some names that are well-represented include UnitedHealth Group , which is in 61% of funds, Cigna , in one-fifth of funds, and HCA Healthcare , which is in 18%. A couple of pharmaceutical companies are also heavily featured in investor portfolios, BoA said. Eli Lilly and Zoetis , for example, are in 40% and 31% of portfolios, according to its screen. Humana is a top pick from Bank of America analysts. Shares in Humana are down 5% year to date after facing several challenges, including a CFO change last year. Still, the company is expected to benefit from rising interest rates and growth in the managed care industry. CVS Health is named another top pick. Shares in CVS Health are down more than 5% in 2022. Still, Bank of America believes the drug store chain is "well-positioned" to execute on its primary care strategy compared to competitors such as Walgreens. Bank of America named 17 small- to mid-cap companies in the sector it also considers buying opportunities. Among them, analysts favored Jazz Pharmaceuticals for its improved finances, and its diversification into different products, including a treatment for sleep disorders. Another small- to mid-cap stock pick is Alnylam Pharmaceuticals , which is developing therapies based on RNA interference. The "attractive" pick for 2022 was down 17% year to date earlier this week.

Brendan McDermid | Reuters