- Equity analysts at Jefferies have recommended a selection of stocks they see as best-positioned to handle the severe volatility hitting markets during the spread of the novel coronavirus.
- Shares of companies with strong balance sheets — or “fortress balance sheets,” as the firm puts it — will weather the severe market volatility, while companies with significant levels of debt “may reach distress.”
- For instance, the firm is recommending clients buy up shares of the industrial giant Honeywell, which reported $9.1 billion in cash on hand at the end of 2019.
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As global financial markets swing wildly in the face of COVID-19, equity investors are seeking out ports in the storm.
On Tuesday in the US, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average rebounded from a more than three-year low hit the session prior as investors bet on the arrival of a coronavirus economic relief plan.
During the volatility that has slammed stock prices, pressured Treasury bond yields, and raised the likelihood of an economic recession that some economists say is already here, analysts across Wall Street are recommending stocks they think can withstand brutal conditions.
The equity research team at the New York investment bank Jefferies published a note to clients on Monday laying out some names they think fit that bill. Throughout the wild market swings, “most expect substantial near-term impact on both earnings and balance sheets,” the analysts wrote.
“Companies with strong balance sheets will weather the storm, while companies with significant leverage may reach distress,” they added.
Associated Press
To come up with a list of stocks they believe are well-positioned, they screened more than 1,000 stocks across their US coverage and examined balance sheet strength — measured by net debt-EBITDA and other financial metrics — along with their analysts’ fundamental views.
They listed seven stocks they felt were prudent investments with strong balance sheets, and two stocks they warned investors avoid for their precarious positions.
They classify “at-risk” balance sheets as ones approaching low cash positions or near-term maturities.
For instance, the firm is recommending clients buy up shares of the industrial giant Honeywell, which reported $9.1 billion in cash on hand at the end of 2019. In contrast, they warned against investing in the US recreational vehicle retailer Camping World Holdings, which the analysts say is carrying elevated debt levels.
A Camping World spokesperson did not return a request for comment.
As Business Insider previously reported last week, Jefferies analysts published a separate memo to clients detailing a list of stock recommendations across sectors they believe are “high-quality names” with “healthy cash-flow and very robust balance sheets.”
Listed below are the seven stocks Jefferies has identified as strong buy candidates — and two they recommend traders avoid entirely.
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