By Barbara Kollmeyer
Wall Street is finding some traction for Tuesday, as investors wade through big earnings and ample, gloomy distractions.
Fighting has ramped up again in Ukraine as the battle begins for the country’s eastern front. Apart from the tragic humanitarian crisis, the conflict is already causing the World Bank and others to cut their global growth forecasts.
Where to invest against such a volatile backdrop? Our call of the day from Goldman Sachs strategists offer up a group of equities they say can hold their in these uncertain times.
“Stable stocks –- those with low share price and earnings growth volatility -– typically outperform in environments of slowing economic growth and tightening financial conditions,” say a team led by Ben Snider and David Kostin in a note from late Monday.
After lagging dramatically against a strong global economic backdrop for the past two years, their stable stocks basket has outperformed the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.10% by 5 percentage points over the past six months, with more “room to run,” they say.
Those stocks remain cheap, trading at a price/earnings premium of around 8% versus a 35-year average of 15%. During a similar batch of slowing growth and Fed tightening in 2018, the premium hovered at 20% for that group, they note.
“Despite recent outperformance, stable stocks do not appear to be pricing the slowdown suggested by recent industry rotations or our economists’ GDP forecasts,” said Goldman.
As for the stock names, their stable basket consists of 50 Russell 1000 /zigman2/quotes/210598144/delayed RUI +0.92% stocks with the most stable EBITDA growth over the past 10 years. Excluded are those whose biggest year-over-year earning fall in the past five years ranked in the bottom 10% of their sector. Stocks in the bottom 10% of their sector based on consensus 2023 EPS expectations are also excluded.
Below are roughly 30 of the 50 stocks Goldman listed:
Financials names include Marsh & McLennan /zigman2/quotes/208419097/composite MMC -0.09% , Bank of New York /zigman2/quotes/200171276/composite BK -1.52% , Nasdaq /zigman2/quotes/205547889/composite NDAQ +1.44% and Northern Trust /zigman2/quotes/207066008/composite NTRS +0.97% , while Sonoco Products /zigman2/quotes/201691559/composite SON +1.37% is the sole materials stock. ResMed /zigman2/quotes/204675483/composite RMD -0.81% , Amgen /zigman2/quotes/209157011/composite AMGN -0.43% , Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.47% and Cerner are among the healthcare names, Verisk Analytics /zigman2/quotes/209704997/composite VRSK +1.68% and Waste Management /zigman2/quotes/207732466/composite WM -2.67% for the industrials names and AmDocs /zigman2/quotes/202810519/composite DOX -2.73% , CDW /zigman2/quotes/208546399/composite CDW +1.07% , Oracle /zigman2/quotes/202180826/composite ORCL -0.82% , Western Union /zigman2/quotes/206269665/composite WU +1.80% , Paychex /zigman2/quotes/202030365/composite PAYX +2.12% and VeriSign /zigman2/quotes/205260150/composite VRSN +0.63% are within a huge batch of IT names.
Netflix /zigman2/quotes/202353025/composite NFLX +0.57% is in the earnings spotlight, with investors looking for a rebound from the streaming giant’s results, due after the market close. Ahead of that, Johnson & Johnson /zigman2/quotes/201724570/composite JNJ +0.47% stock is down on disappointing results and Hasbro /zigman2/quotes/201249319/composite HAS +4.53% also falling on earnings news. IBM /zigman2/quotes/203856914/composite IBM +0.67% will also report late.
American Campus stock is jumping on a WSJ report that Blackstone is close to a $12.8 billion deal for the biggest developer and owner of student housing in the U.S.
United /zigman2/quotes/205037281/composite UAL +3.28% , Southwest , American /zigman2/quotes/209207041/composite AAL +1.89% , Alaska Air /zigman2/quotes/200972303/composite ALK +2.93% , Delta /zigman2/quotes/200327741/composite DAL -0.54% and JetBlue /zigman2/quotes/207639051/composite JBLU +11.39% are creeping higher after a judge in Florida struck down the national mask mandates for the transportation sector and those companies dropped mask mandates. There was cheering and jeering on some flights: