Bank of America predicts the S&P 500 will set a new record high in 2024, projecting a climb to 5,000, about 9.5% above its current level. This optimistic outlook comes despite challenges like Federal Reserve interest rate hikes, the Ukraine war, and Middle East tensions. Market strategist Savita Subramanian from Bank of America sees reduced macro uncertainty and is bullish due to the Federal Reserve’s effective handling of higher rates and inflation.

Here are two of the stocks to watch in this bullish environment.

Arrowhead Pharmaceuticals: Pioneering RNAi Therapeutics

Arrowhead Pharmaceuticals (NASDAQ:ARWR), a frontrunner in medical research, is making waves with its innovative RNA interference (RNAi) mechanism, targeting genes associated with rare and complex diseases. The company’s versatile portfolio features a wide array of RNA chemistries and delivery modes, culminating in a series of RNAi-based therapeutic agents.

The uniqueness of Arrowhead’s approach lies in the RNAi mechanism itself, which is integral to all living cells and can inhibit specific gene expressions, thereby preventing or modifying protein production. This specificity is particularly effective for treating genetically-based diseases.

The company’s proprietary development platform, TRiM (Targeted RNAi Molecule), employs ligand-mediated delivery for tissue-specific targeting with structurally simple agents. Arrowhead’s diverse pipeline spans across 15 active research tracks, addressing conditions from liver diseases to gout and hepatitis.

Plozasiran, its advanced pipeline project, is a potential game-changer for hypertriglyceridemia treatment and is currently in late-stage clinical trials. The drug recently showcased positive data in the Phase 2 SHASTA-2 and MUIR studies.

Bank of America analyst Jason Gerberry underscores the stock’s investment appeal, citing Arrowhead’s mix of early to late programs with significant upside potential and its advancements in pulmonary-based RNAi therapies. Gerberry’s Buy rating and $29 price target reflect a ~24% one-year upside potential.

Oneok, Inc: A Powerhouse in the Natural Gas Sector

Transitioning to the energy sector, Oneok, Inc. (NYSE:OKE), a Tulsa-based company, operates prominently in the natural gas midstream sector. The company’s extensive network offers transport services to gas producers across key regions, from Montana to the Texas Gulf Coast, and boasts one of North America’s premier natural gas liquids (NGL) systems.

The heart of Oneok’s operations lies in its vast network, primarily in Oklahoma, Kansas, and Texas, with branches extending towards the Rockies and the Great Lakes. This network comprises gathering, transport, fractionation, processing, and storage facilities.

Oneok’s recent acquisition of Magellan Midstream Partners has been a strategic expansion, integrating Magellan’s network into Oneok’s and creating a combined system that spans over 25,000 miles of pipeline. Valued at approximately $18.8 billion, this acquisition has significantly bolstered Oneok’s footprint in the refined products movement.

In its third-quarter results of 2023, Oneok reported an adjusted EBITDA of just over $1 billion, an 11% year-over-year increase, although its diluted earnings per share fell short of forecasts.

Bank of America analyst Neel Mitra emphasizes the synergies and free cash flow boost from the Magellan merger, noting Oneok’s ownership of both NGL and refined products pipelines. Mitra highlights the merger’s potential to add a conservative $750 million of annualized cost and commercial synergies through year-end 2026, along with $2.2 billion in cash tax savings through 2027. His Buy rating and $83 price target point to a ~20% one-year gain.

In conclusion, both Arrowhead Pharmaceuticals and Oneok, Inc. stand out as promising investment opportunities in their respective sectors, aligning with Bank of America’s bullish sentiment for the S&P 500’s performance in the coming year.