Buy These Stable Stocks – Goldman Sachs
2022.04.19 13:36
Buy These Stable Stocks – Goldman Sachs
Goldman Sachs strategist Ben Snider has urged investors to buy stable stocks against a volatile backdrop as they are likely to outperform the broader market.
Slowing economic growth and tighter conditions should push investors towards stable stocks, which offer low earnings growth volatility.
“Stable stocks typically trade with a valuation premium to the market, but the premium today is surprisingly small given concerns about Fed tightening and potential recession. Stable growth stocks trade with a P/E premium of just 8% vs. a 35-year average of 15%. In 2018, another “late-cycle” environment of slowing GDP and Fed tightening, stable stocks traded with a premium of more than 20%,” Snider said in a client note.
Snider says that the popularity of secular growth stocks could hamper the appeal of stable stocks, although the former are “vulnerable to tightening financial conditions and trade with elevated valuations.”
The strategist notes that GS’ Stable Growth basket (GSTHSTGR) has outperformed the S&P 500 by 5 pp in the last 6 months. Still, Snider sees additional upside room given the recent volatility.
Goldman Sachs identified in total 50 stable stocks that could offer a place to hide in the times of slowing economic growth and tighter financial conditions. Some of these names are Alphabet (NASDAQ:GOOGL), Home Depot (NYSE:HD), PepsiCo (NASDAQ:PEP), Johnson & Johnson (NYSE:JNJ), Cisco Systems (NASDAQ:CSCO), Visa (NYSE:V), etc.
By Senad Karaahmetovic
