Bank of America says buy these 10 ultra-cheap stocks primed to rebound

A trader works on the floor of the New York Stock Exchange during the afternoon of December 4, 2015 in New York City.

Andrew Burton/Getty Images

• Bank of America predicts that large-cap stock dominance of the stock market could soon end.
• If the US economy enters a recovery phase alongside rate cuts, beaten-down stocks could surge.
• BofA recently shared top stock picks with low valuations that could be primed for a rebound.

Bank of America says large-cap dominance inoof the stock market may soon be over.

The bank's economic regime indicator shows the US economy hovering between downturn and recovery phases. If it starts to enter the latter alongside Fed rate cuts and improving earnings, smaller and cheaper stocks in the S&P 500 should start to outperform the largest companies, the bank said in a recent client note.

"Recoveries saw 2x PE expansion for the Not-So-Nifty 450 as the Nifty 50, and the Smallest 50 enjoyed 12ppt ann. alpha," said Savita Subramanian, the bank's head of US equity and quantitative strategy, said in the note. "History would suggest there is more to go in cap-weighted dominance. But if the Fed's next move is a rate cut, and if the Regime indicator is shifting to a Recovery, we think the run may be closer to done."

As a way to invest in the potential trend, Subramanian and her team highlighted stocks with 12-month forward price-to-earnings ratios below the S&P 500's median; those with high beta, or volatility relative to the index; and those with market caps below the S&P 500's median. All of the stocks have a "Buy" rating from BofA.

We've taken the 10 cheapest stocks from the list and compiled them in descending order according to their forward P/E ratios.

Eastman Chemical Company

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Ticker: EMN

Forward P/E: 9.3

Beta: 1.2

Market cap: $8.3 billion

Sector: Materials

Halliburton Company

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Ticker: HAL

Forward P/E: 9.1

Beta: 1.1

Market cap: $19 billion

Sector: Energy

First Solar

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Ticker: FSLR

Forward P/E: 9

Beta: 1.3

Market cap: $18.7 billion

Sector: Information Technology

Healthpeak Properties

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Ticker: DOC

Forward P/E: 9

Beta: 1

Market cap: $11.7 billion

Sector: Real Estate

Aptiv

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Ticker: APTV

Forward P/E: 8.9

Beta: 1.3

Market cap: $14.9 billion

Sector: Consumer Discretionary

Synchrony Financial

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Ticker: SYF

Forward P/E: 8.4

Beta: 1.3

Market cap: $25.9 billion

Sector: Financials

Delta Air Lines

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Ticker: DAL

Forward P/E: 8.4

Beta: 1.4

Market cap: $34.7 billion

Sector: Industrials

Host Hotels & Resorts

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Ticker: HST

Forward P/E: 8.1

Beta: 1.2

Market cap: $21 billion

Sector: Real Estate

Devon Energy

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Ticker: DVN

Forward P/E: 8.0

Beta: 1.1

Market cap: $21 billion

Sector: Energy

United Airlines

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Ticker: UAL

Forward P/E: 7.7

Beta: 1.3

Market cap: $28.5 billion

Sector: Industrials

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