These strong stocks are under-owned and have momentum, Bank of America says

Bank of America identified Charter Communications, Howmet Aerospace, and Toast as under-owned stocks with potential for gains, citing low fund ownership and positive momentum catalysts. Charter Communications, with 17% fund ownership and a high momentum rank, recently announced a $21.9 billion merger with Cox Communications. Howmet Aerospace, despite a 54% year-to-date gain driven by the aerospace market, has only 23% fund ownership, while Toast, up 18% this year, has 18% fund ownership, suggesting both are overlooked relative to their performance.

Analysis

Bank of America has identified several U.S.-listed stocks, including Charter Communications (CHTR), Howmet Aerospace (HWM), and Toast (TOST), as potentially overlooked opportunities poised for gains, based on a screen utilizing data as of April 30. The firm's methodology targets stocks with low fund ownership, an overweight allocation by existing fund holders relative to their benchmark, and a high "triple momentum rank," which amalgamates earnings, price, and news momentum. This screening occurs amidst a market environment where the S&P 500 has experienced a significant surge of over 20% from its April 7 intraday low, partly attributed to reversals or delays in tariffs, yet volatility persists due to ongoing policy changes, prompting investors to seek undervalued assets. Charter Communications, with a low 17% fund ownership, exhibits a high triple momentum rank of 93 and has seen its shares increase by 20% this year, further bolstered by the recently announced $21.9 billion merger agreement with Cox Communications. Howmet Aerospace, despite a substantial 54% year-to-date gain and reaching a new 52-week high, driven by growth in defense and commercial aerospace and strong first-quarter earnings, reports only 23% fund ownership. Similarly, Toast, with an 18% rally this year, is also characterized by low fund ownership at 18%. The overall market sentiment for these developments is strongly positive (0.75), with particularly high positive sentiment for Howmet (0.9) and Charter (0.8), reflecting the potential upside highlighted by Bank of America for these under-owned names with positive fundamental and event-driven catalysts.

Key Decisions for Investors

• Investors should consider the identified stocks, such as Charter Communications, Howmet Aerospace, and Toast, as potential alpha-generating opportunities given their low institutional ownership despite strong performance and positive catalysts highlighted by Bank of America.
• The upcoming $21.9 billion merger for Charter Communications represents a significant event that could unlock further value, warranting close attention to deal progression and integration prospects.
• For Howmet Aerospace, continued strength in the defense and commercial aerospace markets, coupled with its robust earnings, suggests sustained momentum, though investors should monitor for signs of the trade becoming crowded despite current low fund ownership.
• Given the persistent market volatility and ongoing policy changes, a diversified approach is advisable, even when considering these specific under-owned stocks with positive outlooks.