Investors’ concerns of a potential recession contributed to a global market sell-off Monday, but Goldman Sachs sees a way to play a hypothetical economic downturn. Following Friday’s weaker-than-expected jobs report for July, the S & P 500 and the Dow Jones Industrial Average saw their worst sessions in nearly two years on Monday. That day, Japan’s Nikkei 225 also saw its worst session since Wall Street’s “Black Monday” in 1987. Global markets then rebounded Tuesday, but investors remain on edge. In the face of these concerns, Goldman has a basket of stable growth stocks that could provide a measure of safety amid concerns about U.S. economic deceleration. These names may also be poised to do well as economic policy becomes uncertain. “Investor focus will soon shift to the 2024 US presidential election, which is only three months away,” Goldman’s chief U.S. equity strategist David Kostin wrote in a Monday report. “Stable growth stocks have historically outperformed when economic policy uncertainty rises.” The firm’s basket is comprises 50 names in the Russell 1000 with the most stable earnings before interest, taxes, depreciation and amortization growth over the past 10 years. Here are some of the names that made the cut: Of the various sectors on the list, information technology has the most number of names at 14, and only five of them have seen gains this year. Tech giant International Business Machines and cloud security company F5 are two of them, with shares up more than 14% and around 5%, respectively, in 2024. Over the past month, IBM has moved around 6% higher and F5 has moved more than 9% higher after both companies reported second-quarter earnings that beat the Street’s expectations . The names also have 10-year EBITDA growth variability that is on the higher end of the range for the group, with IBM at 15 percentage points and F5 at 16 percentage points. However, where they diverge is in their consensus growth estimates for the full year. Specifically, Goldman notes that F5 has a consensus estimate of 12% growth for earnings per share in 2024, while IBM has a consensus earnings per share growth estimate of 5%. In consumer discretionary, Domino’s Pizza made the list. The name has a 10-year EBITDA growth variability of 7 percentage points. Domino’s also has a full-year consensus estimate growth of 10% for earnings per share and 7% for revenue. Shares of the company are up around 4% in 2024. Domino’s CEO Russell Weiner last month told CNBC’s Jim Cramer that he sees strength in the company’s U.S. business, as “value has never been higher.” The CEO also noted that there has been an increase in orders “on our delivery business, carry out business, every single income segment.” Communication services stock Sirius XM and health-care name Zoetis — two more names on the list — have not fared as well this year. While Zoetis is down more than 6% in 2024, Sirius XM has seen even steeper losses, with shares down nearly 44% on the year.
https://image.cnbcfm.com/api/v1/image/107289798-1692673706544-gettyimages-1540327912-IBM_EARNS.jpeg?v=1722958135&w=1920&h=1080
Source link
