As investors prepare for stocks to potentially retest their lows for the year, Evercore ISI has lowered its target on the S&P 500 and said traders should look for stocks of companies with strong cash flow. Markets have plummeted this week on fears that the Federal Reserve’s commitment to aggressive rate hikes for the remainder of this year will send the economy into recession. Major averages ended Thursday at their lowest levels since falling to their summer lows. The S&P 500 fell to about 3,757, about 3% above its June low of 3,636. “In the context of a target of 3,975, we expect a full retest of the June low in the coming weeks before the September/October seasonality leads to a year-end rally,” Evercore ISI senior managing director Julian Emanuel said in a note on Thursday. Evercore ISI analysts recommend “patient accumulation” of its collection of free cash flow favorites. The stocks on the list are value-oriented, have strong free cash flow and shareholder return profiles, and lower volatility. Here are 10 of the names: Synchrony Financial has generated free cash flow (FCF) returns of 47.5% over the past 12 months and a shareholder return of 28.8% over the same period. The share price has fallen about 36% this year. Bank of America has an FCF return of 19.5% and a shareholder return of 8.1%. Both Marathon Oil and Marathon Petroleum performed well, with FCF returns close to 20% and shareholder returns over the past 12 months of approximately 13% and 22% respectively. GoDaddy and Dell Technologies are among the smaller names by market capitalization on the Evercore ISI list. GoDaddy’s free cash flow return is about 7.5% while Dell’s is 9.6%. Meta Platforms and Charter Communications are also part of the group, along with home builders Lennar and NVR.
Buy these ‘free cash flow favorites’ as the S&P 500 prepares to test the June lows
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