Need to Know Archives | Email alerts

Oct. 4, 2019, 9:33 a.m. EDT

Braced for an economic downturn? These cheap stocks will see you through, says Goldman

Critical information for the U.S. trading day

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Fiserv Inc. (FISV)
  • X
    AutoZone Inc. (AZO)
  • X
    Amdocs Ltd. (DOX)

or Cancel Already have a watchlist? Log In

By Barbara Kollmeyer, MarketWatch


Getty Images
No hiding.

While the debate rages over whether the global economy is careening towards a recession, our call of the day from Goldman Sachs, suggests investors steer towards some reasonably-priced stocks that can see them through a downturn.

Stable growth stocks “fare best in environments of slowing economic growth and rising uncertainty,” say a team of Goldman analysts led by Ben Snider.

Over the past two years, those companies with a history of growth stability have returned 22% vs. 16% for the S&P 500. That compares to a return of 1% for stocks with the most volatile historical earnings growth.

“In addition to the uncertain macroeconomic backdrop, volatile growth companies are currently growing earnings at a rate only marginally faster than stable growth companies, an unusual dynamic that further reduces their appeal to investors,” said Snider and the team, in a note to clients.

As a reminder, growth stocks are those that tend to see faster-than-average earnings and revenue growth, but carry some risk. The popularity of these stocks has been ebbing lately as investors fret over the economy, trade, etc., favoring instead perceived safer-havens.

Goldman says better news on the global economy would be a potential headwind for these equities, though that’s offset by political uncertainty stemming from a 2020 U.S. presidential election. Another thing to consider is that these stocks have also grown in popularity, therefore they can command more of a premium.

Goldman has picked through its basket of stable stocks to find those that they say are most reasonably priced. Such factors include shares that aren’t too volatile, those with growth that’s steady and a reasonable price earnings multiple — share price relative to per-share earnings.

On that list: financial services technology group Fiserv /zigman2/quotes/204817680/composite FISV +0.61%  , autoparts retailer Autozone /zigman2/quotes/209114484/composite AZO +0.67%  , software group Amdocs /zigman2/quotes/202810519/composite DOX +1.33% , media group Omnicom /zigman2/quotes/209996569/composite OMC -1.39% , Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -0.06%  and Walmart /zigman2/quotes/207374728/composite WMT +1.56%  .

The economy

September U.S. payrolls rose 136,000, which was below forecasts, though prior months’ levels were revised higher. The unemployment rate dropped to 3.5%, the lowest since 1969 and average hourly earnings also dipped. Elsewhere, data showed the foreign trade deficit widening.

We’ll hear from lots of Federal Reserve officials Friday, with conferences in Boston and Washington. Fed Chairman Jerome Powell will appear at the latter.

The market

The Dow /zigman2/quotes/210598065/realtime DJIA +0.33%  , S&P /zigman2/quotes/210599714/realtime SPX +0.07%   and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.05%   are rising at the start of trade after jobs data, which also triggered a drop in gold /zigman2/quotes/210039486/delayed GCZ19 +0.38% prices, though the dollar /zigman2/quotes/210598269/delayed DXY +0.0020% isn’t budging much. Oil is higher.

/zigman2/quotes/204817680/composite
US : U.S.: Nasdaq
$ 111.33
+0.68 +0.61%
Volume: 3.43M
Nov. 13, 2019 4:00p
P/E Ratio
51.46
Dividend Yield
N/A
Market Cap
$74.94 billion
Rev. per Employee
$242,625
loading...
/zigman2/quotes/209114484/composite
US : U.S.: NYSE
$ 1,174.76
+7.79 +0.67%
Volume: 179,725
Nov. 13, 2019 6:30p
P/E Ratio
18.49
Dividend Yield
N/A
Market Cap
$28.05 billion
Rev. per Employee
$125,680
loading...
/zigman2/quotes/202810519/composite
US : U.S.: Nasdaq
$ 68.32
+0.90 +1.33%
Volume: 1.39M
Nov. 13, 2019 4:00p
P/E Ratio
23.62
Dividend Yield
1.67%
Market Cap
$9.11 billion
Rev. per Employee
$164,439
loading...
/zigman2/quotes/209996569/composite
US : U.S.: NYSE
$ 77.99
-1.10 -1.39%
Volume: 1.78M
Nov. 13, 2019 6:30p
P/E Ratio
13.12
Dividend Yield
3.33%
Market Cap
$17.22 billion
Rev. per Employee
$217,190
loading...
/zigman2/quotes/201724570/composite
US : U.S.: NYSE
$ 131.27
-0.08 -0.06%
Volume: 5.92M
Nov. 13, 2019 6:30p
P/E Ratio
25.01
Dividend Yield
2.89%
Market Cap
$347.35 billion
Rev. per Employee
$603,509
loading...
/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 120.98
+1.86 +1.56%
Volume: 8.05M
Nov. 13, 2019 6:30p
P/E Ratio
27.26
Dividend Yield
1.75%
Market Cap
$338.58 billion
Rev. per Employee
$223,654
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,783.59
+92.10 +0.33%
Volume: 278.39M
Nov. 13, 2019 4:56p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,094.04
+2.20 +0.07%
Volume: 1.72B
Nov. 13, 2019 4:56p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,482.10
-3.99 -0.05%
Volume: 1.99M
Nov. 13, 2019 5:16p
loading...
/zigman2/quotes/210039486/delayed
US : U.S.: Nymex
$ 1,468.90
+5.60 +0.38%
Volume: 121,230
Nov. 14, 2019 8:37a
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.38
+0.0020 +0.0020%
Volume: 0.00
Nov. 14, 2019 8:37a
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Markets

Story Conversation

Commenting FAQs »

Partner Center

World News from MarketWatch

Link to MarketWatch's Slice.