Market collapse leaves the best opportunity to pick stocks 'maybe ever,' Bank of America says

Published Tue, Mar 17 202011:19 AM EDTUpdated Tue, Mar 17 20204:04 PM EDT

Key Points

The market rout since February has seen less "differentiation" among stocks than any other sell-off post-crisis, according to Bank of America.
"Best opportunity to pick stocks. Maybe ever," Bank of America equity and quant strategist Savita Subramanian said in a note to clients on Tuesday.
Tuesday could be one of those opportunities, according to CNBC's Jim Cramer. Stocks rebounded on Tuesday, with the Dow closing up more than 1,000 points.
"There are going to be opportunities today because there's a lot of give up," said Cramer on "Squawk on the Street."

This widespread market sell-off isn't discriminating against any stocks, creating a unique opportunity for investors to pick which individual equities will rebound, according to Bank of America. The firm said the market rout since February has seen less differentiation among stocks — meaning all stocks are equally getting punished — than past sell-offs. "Best opportunity to pick stocks. Maybe ever," Bank of America equity and quant strategist Savita Subramanian said in a note to clients on Tuesday. "Given the uniform penalty for stocks during the selloff, the opportunity for differentiated stock selection is arguably higher vs. in prior down markets." Since February, markets experienced a tailspin as the fast-spreading coronavirus created unprecedented financial and societal disruption. The longest stock market bull run in history came to an end last week as all three major averages slid into bear market. Even after the Federal Reserve stepped in and slashed interest rates to zero, markets continued their downward spiral, with the Dow and S & P 500's worst day since the "Black Monday" crash of 1987 on Monday. The staggering nuance about this sell-off is its punishing all stocks and "valuation dispersion among S & P 500 stocks today is near all-time highs," said Subramanian. While other event driven sell-offs punish certain stocks with correlations to the catalyst, stocks of any kind seem to be in the red these days, creating a strong opportunity for stock pickers when relief comes. Tuesday could be one of those opportunities, according to CNBC's Jim Cramer. Stocks rebounded from the worst day since 1987 on Monday, with all three major averages opening in positive territory on Tuesday. The Dow Jones Industrial Average rose more than 1,000 points on hopes of a $1 trillion stimulus package. "Individual stocks are all being brought down by the indices. The great opportunity — yes, I'm willing to use that word —come from the obliteration of the futures, meanwhile there are companies that are actually doing well, obviously there are companies that are doing quite poorly and we'll go over both. But there are going to be opportunities today because there's a lot of give up," said Cramer on "Squawk on the Street." Bank of America said this trend is playing out with its clients. "Apparently, investors are picking stocks, and swapping alpha for beta," said Subramanian. Last week, when the S & P 500 lost 9%, the firm's clients' net buying of single stocks was at a record high of $5.3 billion. Plus, net sales of ETFs was at a record level, based on data since 2008. "We saw record sales of US equities by private clients last week, driven by their second-biggest ETF sales in our data," said Subramanian. "Historically, following market corrections in 2011 and 2018, private clients have added back equity exposure via single stocks and either sold or meaningfully slowed their purchase of ETFs for the next four weeks." Healthcare and consumer staples are seeing the biggest inflows, the bank said. Bank of America has an overweight rating on both of those sectors. — with reporting from CNBC's Michael Bloom.

Traders work on the floor of the New York Stock Exchange on March 09, 2020.

Spencer Platt | Getty Images

This widespread market sell-off isn't discriminating against any stocks, creating a unique opportunity for investors to pick which individual equities will rebound, according to Bank of America.