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These fortress balance sheet stocks can weather a recession, Morgan Stanley says


Morgan Stanley has highlighted some stocks it believes are equipped to weather this type of storm. The bank’s strategists sifted through the Russell 1000 Index – excluding financials, real estate and utilities – for companies with strong balance sheets. The criteria used for the screen are: Cash as a percentage of enterprise value greater than 3% Free cash flow growth greater than 5% expected by analysts in each of the next two years Expected return on invested capital in each of the next two years years more than 10% Asset/Liability Multiple more than 1 Debt Ratio less than 2.5 This screen only includes stocks that have investment grade credit ratings and excludes names with negative equity.&nbsp

Check out 10 names that made the list: Micron (US.MU) made the list from Morgan Stanley, with cash as a percentage of company value at 12.2%. The chipmaker’s free cash flow is also expected to more than double next year and grow nearly 52% the following year. Shares of the company have struggled this year, falling about 40% during that time. However, UBS (US.USB) reiterated it last week as a top pick, noting that company- and industry-specific factors should support its margins. “Amid macro concerns, we believe investors continue to overlook several key factors,” analyst Tim Arcuri wrote. “Although weakness in the PC/smartphone end market weighs somewhat on ASP DRAMs in the near term, we expect very strong price support heading into C2023 as industry growth in the supply of bits should compress significantly.” United Therapeutics (US.UTHR) tops Morgan Stanley’s list, with cash as a percentage of company value at 24.9%. Analysts also expect double-digit growth in free cash flow over the next two years and project a return on investment of 14.3% and 13.5% over those years. Shares of the biotech company outperformed the market in 2022, posting a slight gain during that time. The stock is also up 20% over the past 12 months. Shoemaker Skechers (US.SKX) also made the cut, with 8.5% cash as a percentage of company value. The company’s free cash flow is expected to increase by just 7.1% next year, but it is expected to jump 72.5% the following year. The stock is down around 16% in 2022, outperforming the S&amp P 500. Argus Research upgraded it to buy pending last week, noting that “supply chain initiatives and brand strong company are expected to grow revenues and profits over the next two years.” Alphabet, Google’s (US.GOOG) (US.GOOGL) parent company, is also on the list, with cash representing a percentage of company value of 7.2%. The company’s free cash flow is also expected to increase by 13.4% and 17.7% in each of the next two years. Alphabet shares have fallen 26% this year as investors largely abandoned tech names in the face of rising rates. Other stocks on the list are: Arista Networks (US.ANET), Johnson &amp Johnson (US.JNJ), Merck, Five Below (US.FIVE), Jabil (US.JBL) and Emerson Electric (US.EMR).

Companii externe de interes

Tower Semiconductor (US.TSEM), CrowdStrike (US.CRWD) și Arista (US.ANET) sunt companiile urmărite astăzi pe Wall Street. În plus, la această oră putem spune că,&nbsp contractele futures pe acțiuni din SUA s-au redresat pe un trend ascendent, după zile de pierderi, pe fondul conflictului geopolitic.&nbsp


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