Investors are bracing for a gloomy 2023 by doubling down on cash-rich companies. “We favor cash-generating companies over companies that need capital to grow. Not only will interest rates remain higher than they have been in the recent past, but we are likely exiting an era of hyper-accommodative monetary policy,” Bank of America said in January. said. 16 records. The higher the return on free cash flow, the better the position of the company to meet its debt obligations. A company with high free cash flow can access cash more quickly in times of emergency or opportunity. “Companies that pay dividends, companies that have great cash flow, quality balance sheets, international stocks — especially international value — that’s where the puck is going and I think it’s going to continue,” Josh Brown, CEO of Ritholtz Wealth Management, told CNBC last week. told to Using FactSet data, CNBC Pro checked out stocks that boast plenty of cash and could be well positioned for a tough year ahead. The criteria used are: Stocks with a high free cash flow yield of more than 10% Low volatility (beta less than 1) Potential upside to the price target At least a 40% buy rating Stocks shown on the screen below include: telecom, healthcare and consumer sectors, generally regarded as safe havens during recessions. US-listed Chesapeake Energy Corporation was the only energy stock on display, with a free cash flow yield of around 14%. Analysts gave it a 53.7% bullish rating, and the majority (76.5%) gave it a buy rating. The stock, like most energy firms, has performed well in the past year – already up around 40%. Last week, the firm announced it had agreed to sell part of its south Texas operations for $1.43 billion in cash. Firms in the healthcare or pharmaceutical industries, such as US companies Bristol-Myers Squibb and CVS Health, also discounted. Financial services firm Cantor Fitzgerald said in January. 17 notes that 2023 could be Bristol-Myers Squibb’s “breakout year” and has given the stock an overweight rating. “BMY has one of the best 2023E growth profiles of a US Pharma group … standing out in a recession year,” Cantor wrote. Canadian financial firm Fairfax was singled out as having the highest FCF yield on the list – 30.4%, while Hong Kong-listed WH Group – the world’s largest pork producer – received the highest buy rating at 94%. Two telecoms firms – the UK’s Vodafone Group and Germany-based Deutsche Telekom – were among the highest FCF yields at 27% and 23.7% respectively. Argus Research in January. 20 report noted that Vodafone shares have outperformed in the last three months. He added that its current valuation is reasonable given the slow growth forecast. — CNBC’s Michael Bloom and Fred Imbert contributed to this report.
Analysts love this stock, which generates a lot of cash
