Investors are bracing for a bleak 2023 by doubling down on cash-rich companies. “We prefer cash-generating businesses to those that need capital to grow. Not only will rates likely remain higher than they have been lately, but we are likely emerging from an era of political hyper-loose monetary policy,” Bank of America said. in a note dated January 16. The higher the free cash flow yield, the better a company’s position to meet its debt obligations. A business with high free cash flow is also able to access cash faster in times of emergency or opportunity. “Companies that pay dividends, companies with strong cash flow, quality balance sheets, international stocks – especially international value – that’s where the puck was already heading, and I think it will continue. “, Josh Brown, CEO of Ritholtz Wealth Management, told CNBC last week. Using data from FactSet, CNBC Pro selected stocks that have plenty of cash and could be well positioned for a tough year. The criteria used are: Stocks with a high free cash yield of more than 10% Low volatility (beta less than 1) Upside potential relative to price target Buy rating of at least 40% Stocks that appear on the screen below include those in the telecommunications, healthcare and consumer sectors, which are generally seen as safe havens in the event of a downturn. The US-listed Chesapeake Energy Corporation was the only energy stock to appear on screen, with a free cash flow yield of almost 14%. Analysts gave it a 53.7% upside and the majority (76.5%) gave it a “buy” rating. The stock, like most energy companies, has done well over the past year, already climbing around 40%. Last week, the company announced that it had agreed to sell part of its South Texas business for $1.43 billion in cash. Companies in the health or pharmaceutical sectors have also made a difference, 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 2023E growth profiles in the U.S. pharma group … standing out 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 world’s largest pork producer – received the rating. highest purchase price at 94%. Two telecommunications companies – British group Vodafone and German Deutsche Telekom – had the highest FCF yields, at 27% and 23.7% respectively. Argus Research in a January 20 report noted that Vodafone shares have outperformed the benchmark over the past three months. He added that its current valuation is reasonable, given the weak growth prospects. – CNBC’s Michael Bloom and Fred Imbert contributed to this report.
Analysts Love These Stocks That Make Big Money