Despite the seemingly endless stock-market carnage, analysts at Jefferies Research have found some high-quality stocks with strong fundamentals and attractive valuations, and priced at what Jefferies called “practically stealing.”
Barron's recently offered a list of stocks from analysts at Jefferies Research, spanning all sectors that investors would want to own across a business cycle, despite potential near-term drawbacks.
Here are the top picks for 10 industries:
- Communication Services: Videogame stocks are less-exposed to the Covid-19 disruption and possibly even stand to benefit as people spend more time on home entertainment. Within the group, Activision Blizzard (ticker: ATVI) is a favorite of analyst Alexander Giaimo.
- Consumer Discretionary: While casinos were among the hardest hit during the coronavirus selloff, Las Vegas Sands (LVS) is a stable long-term bet once the pandemic impact fades, according to analyst David Katz.
- Consumer Staples: While global economic growth remains a concern, chocolate and other indulgence foods typically sell well in recessionary environments, noted analyst Rob Dickerson. Mondelez (MDLZ), known for its various snacking products such as the Cadbury chocolates and Oreo cookies, is well-positioned relative to peers.
- Energy: The recent price war between Saudi Arabia and Russia has flooded the market with millions of barrels of additional crude and led to a price collapse of the commodity. But Euronav (EURN), the largest crude tanker company in the world, is likely to benefit as tanker demand increases, both for inventory building and floating storage, according to analyst Randy Giveans.
- Financials: SVB Financial (SIVB), focusing on funding early-stage high-tech companies, is well-positioned to capitalize on the rebound in innovation markets once the economic damage from the coronavirus pandemic subsides, analyst Casey Haire wrote.
- Healthcare: While Gilead (GILD) stock has been rising lately in hope for the potential coronavirus treatment remdesivir, its valuation remains cheap, noted analyst Michael Yee.
- Industrials: Cintas Corp. (CTAS) generates about 80% of its revenue from uniform rentals to corporate clients, largely sold as a program for the entire length of contracts, analyst Hamzah Mazari said.
- Information Technology: Over the past 20 years, Cisco Systems (CSCO) has proven its resilience during periods of uncertainty, meltdown, contagion or crisis, noted analyst George Notter.
- Materials: Rio Tinto (RIO) is one of the largest iron ore miners in the world, with a strong balance sheet. According to analyst Chris LaFemina, the company generates significant free cash flow through the cycle, has relatively low geopolitical and operating risk, and pays a large dividend—currently yielding more than 8%. Because of its financial strength.
- Real Estate: With schools moving classes online and companies asking employees to work from home, the self-quarantine expected in the next few weeks will create a surge in demand for internet infrastructure. Equinix (EQIX) owns a large number of internet-exchange facilities across dozens of global markets, which allow internet service providers, digital content providers, cloud services, enterprises, financial services, and others to connect their networks.
If you aren't comfortable with those suggestions or that strategy, a beloved investment icon has offered a simpler approach soaked in common sense.
Investment guru Jim Cramer said savvy investors should take the recent stock-market plunge to start buying stocks in consumer goods “we can’t live without.”
The “Mad Money” host said on CNBC that defensive stocks can outperform the broader market during an economic downturn because there is constant demand for their products.
“Check out your medicine cabinet, check your refrigerator, look at your pantry,” Cramer said, noting that nearly any product that can be found in the supermarket would qualify.
He cited examples as Conagra Brands (CAG), J M Smucker (SJM) and Clorox (CLX).
“We should buy quality recession-proof stocks because that’s what works when the economy’s on hiatus,” Cramer said.
“There are many industries that are truly on the ropes here and I expect them to remain on the ropes for a long time, unless they fall flat on the canvas,” he said.
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