Bank of America Picks 8 Stocks for Q3, Cites 2026 Rate Cut

Bank of America has unveiled its top ten investment picks for the third quarter, featuring eight stocks recommended for purchase and two for short selling. The buy recommendations include Cisco Systems (CSCO.US), Boeing (BA.US), cloud computing platform Datadog (DDOG.US), credit scoring company Fair Isaac (FICO.US), regional bank KeyCorp (KEY.US), Levi Strauss & Co. (LEVI.US), medical device manufacturer Medtronic (MDT.US), and Warner Bros. Discovery (WBD.US). The stocks suggested for short selling are food giant Conagra Brands (CAG.US) and telemedicine company Hims & Hers Health (HIMS.US). Bank of America has assigned a "buy" rating to the recommended stocks and a "underperform" rating to the short-selling candidates.

The bank's report to clients highlights that its economic and interest rate teams have updated their outlook for the second half of 2025. The economists maintain their expectation that the Federal Reserve will remain inactive in 2025 and will implement a 100 basis point rate cut in 2026. Analysts note that inflation may rise in the second half of the year due to tariff policies, making it difficult for the Federal Reserve to initiate rate cuts without seeing a sustained decline in inflation.

The report also emphasizes that despite potential pressures from immigration policies and trade uncertainties, the overall labor market remains resilient. This resilience is expected to support the performance of the recommended stocks, which are seen as having strong growth potential and robust financial health. The inclusion of companies like Cisco and Boeing in the buy list reflects the bank's confidence in the technology and aerospace sectors, which are expected to benefit from ongoing innovation and increased demand.

Cisco Systems, a leading provider of networking equipment and software, is seen as a key player in the digital transformation of businesses. The company's strong market position and innovative product offerings make it an attractive investment option. Similarly, Boeing, a major player in the aerospace industry, is expected to benefit from the recovery in global air travel and increased demand for new aircraft. The company's strong order backlog and focus on innovation position it well for future growth.

The inclusion of Datadog and Fair Isaac in the buy list highlights the bank's positive outlook on the technology and financial services sectors. Datadog, a cloud-based monitoring and analytics platform, is seen as a key player in the growing market for cloud services. The company's strong customer base and innovative product offerings make it an attractive investment option. Fair Isaac, a leading provider of credit scoring and analytics services, is expected to benefit from the increasing demand for data-driven decision-making in the financial services industry.

The recommendation of KeyCorp and Levi Strauss & Co. reflects the bank's confidence in the regional banking and consumer goods sectors. KeyCorp, a regional bank with a strong presence in the Midwest, is seen as a stable and profitable investment option. The company's strong balance sheet and focus on customer service position it well for future growth. Levi Strauss & Co., a leading provider of denim and apparel, is expected to benefit from the growing demand for sustainable and high-quality products. The company's strong brand and focus on innovation position it well for future growth.

The inclusion of Medtronic and Warner Bros. Discovery in the buy list highlights the bank's positive outlook on the healthcare and entertainment sectors. Medtronic, a leading provider of medical devices and therapies, is seen as a key player in the growing market for healthcare solutions. The company's strong product portfolio and focus on innovation position it well for future growth. Warner Bros. Discovery, a leading provider of entertainment content, is expected to benefit from the growing demand for streaming services and high-quality content. The company's strong brand and focus on innovation position it well for future growth.

The recommendation of Conagra Brands and Hims & Hers Health for short selling reflects the bank's concerns about the food and telemedicine sectors. Conagra Brands, a food giant with a diverse portfolio of products, is seen as facing challenges from changing consumer preferences and increased competition. The company's reliance on traditional food products and lack of innovation position it poorly for future growth. Hims & Hers Health, a telemedicine company, is seen as facing challenges from regulatory uncertainties and increased competition. The company's reliance on telemedicine services and lack of diversification position it poorly for future growth.