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BofA Names Zoom, Devon Energy as Best of Breed Stocks

'Best of Breed stocks are typically companies with strong management, balance sheets, earnings growth, and cash flow,' BofA said.
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Bank of America has put together a list of 11 global “best of breed” stocks for the first quarter of 2022, including Zoom Video  (ZM) - Get Zoom Video Communications, Inc. Class A Report, Devon Energy  (DVN) - Get Devon Energy Corporation Report and Freeport McMoRan  (FCX) - Get Freeport-McMoRan, Inc. Report.

The BofA list is overweight staples, utilities and materials relative to the MSCI ACWI. “Best of Breed stocks are typically companies with strong management, balance sheets, earnings growth, and cash flow,” wrote BofA strategists led by Michael Hartnett.

“We believe the very highest quality companies are likely to continue to generate strong returns relative to the market over the long term. Bouts of market volatility also are supportive of high-quality stocks.”

The other eight stocks are Switzerland’s luxury brands company Richemont  (CFRUY) , Chinese liquor maker Wuliangye Yibin, Japanese machine tool maker Fanuc FANUY, semiconductor company KLAC  (KLAC) - Get KLA Corporation Report, semiconductor wafer marker Tokyo Electron  (TOELY) , U.K. commodity miner Rio Tinto  (RIO) - Get Rio Tinto Plc Report and Spanish utility Iberdrola  (IBDRY) .

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As for Zoom, “it is the leader in the video conferencing market,” BofA analysts said.

Morningstar analyst Dan Romanoff is also bullish on Zoom, putting fair value at $260, compared to its recent level of $201.42. He gives the company a narrow moat and was impressed with its third-quarter earnings report and fourth-quarter outlook.

“The company's continued pivot to larger customers was evident this [third] quarter, while Zoom Phone remained strong and churn continued to normalize,” Romanoff wrote last month.

“We remain impressed by Zoom’s ability to over-deliver simultaneously in terms of both growth and margins. We see a long runway for growth as the company gains traction with Zoom Phone and evolves its main application to a unified communication platform.”

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