Investors are preparing for a bleak 2023 by doubling down on cash-rich companies. “We prefer companies that generate cash over companies that need capital to grow. Not only are interest rates likely to remain higher than they have been in the recent past, but we are likely to be exiting an era of hyper-accommodative monetary policy,” Bank of America said. . in a note dated Jan. 16. The higher the free cash flow rate of return, the better a company’s position is to meet its debt obligations. A company with a high free cash flow also has quicker access to cash in case of need or opportunity. “Companies paying dividends, companies with great cash flow, high quality balance sheets, international equities – international value in particular – this is where the puck is already going and I think it will continue to be,” said Josh Brown, CEO of Ritholtz Wealth Management. , told CNBC last week. Using FactSet data, CNBC Pro screened for cash-heavy stocks that could be well positioned for a rocky year. These were the criteria used: Stocks with a high free cash flow yield of more than 10% Low volatility (beta of less than 1) Potential upside to price target Buy rating of at least 40% telecom, healthcare and consumer sectors, which are generally considered safe ports in times of downturn. US-listed Chesapeake Energy Corporation was the only energy stock to hit the screen, posting free cash flow yield of nearly 14%. Analysts gave it 53.7% upside potential and the majority (76.5%) gave it a “Buy” rating. The stock, like most energy companies, has done well over the past year – already up about 40%. Last week, the company announced it had agreed to sell part of its South Texas operations for $1.43 billion in cash. Companies in the healthcare or pharmaceutical industry also made it through, such as the American companies Bristol-Myers Squibb and CVS Health. Financial services firm Cantor Fitzgerald said in a Jan. 17 note that 2023 could be Bristol-Myers Squibb’s “breakout year” and gave the stock an overweight rating. “BMY has one of the best growth profiles for 2023E of the US Pharma group… which is striking in a recession year,” Cantor wrote. Canadian financial firm Fairfax stood out for having the highest FCF yield on the list – at 30.4%, while Hong Kong-listed WH Group – the largest pork producer in the world – took the top buy rating at 94%. Two telecommunications companies – the UK’s Vodafone Group and Germany-based Deutsche Telekom – had some of the highest FCF returns at 27% and 23.7% respectively. Argus Research noted in a January 20 report that Vodafone shares have outperformed the benchmark over the past three months. It added that the current valuation is reasonable given the sluggish growth outlook. – CNBC’s Michael Bloom and Fred Imbert contributed to this report.
Analysts like these stocks that make big money