Investors are preparing for a bleak 2023 by doubling down on cash-rich companies. “We prefer companies that generate cash rather than those that need capital to grow. Not only are rates likely to remain higher than they were in the recent past, but we are likely to emerge from an era of ultra-loose monetary policy,” Bank of America said. In a January 16th note. The higher the free cash flow return, the better positioned the company is to meet debt obligations. A company with high free cash flow is also able to access cash more quickly in case of emergency or opportunity. Josh Brown, CEO of Ritholtz Wealth Management, told CNBC last week. Using FactSet data, CNBC Pro examined stocks that boast a lot of cash and could be well positioned for a tough year. These were the criteria used: Stocks with a high free money yield of more than 10% Low volatility (beta less than 1) Potential upside for a price target A buy rating of at least 40% The stocks shown on screen below include those in the telecom and healthcare sectors health and consumers, which are generally considered safe havens in the downturn. US-listed Chesapeake Energy Corporation was the only energy stock on screen, with a free cash flow yield of nearly 14%. Analysts gave it a gain of 53.7%, and a majority (76.5%) gave it a Buy rating. The stock, like most energy companies, has done well in the past year — it’s already up about 40%. The company announced last week that it had agreed to sell part of its South Texas operations for $1.43 billion in cash. Companies in the healthcare or pharmaceutical industries have also made cuts, such as US companies Bristol-Myers Squibb and CVS Health. Financial services firm Cantor Fitzgerald said in a Jan. 17 note that 2023 could be a “breakout year” for Bristol-Myers Squibb, and gave the stock an overweight rating. “BMY has one of the best growth profiles for 2023E for the US pharma group…which stands out in a stagnant year,” Cantor wrote. Canadian financial firm Fairfax had the distinction of having the highest FCF yield on the list – at 30.4%, while Hong Kong-listed WH Group – the world’s largest pork producer – had the highest Buy rating at 94%. Two telecom companies — Britain’s Vodafone Group and Germany-based Deutsche Telekom — were among FCF’s top earners at 27% and 23.7%, respectively. An Argus Research report on January 20 indicated that Vodafone shares have outperformed the benchmark over the past three months. It added that its current assessment was reasonable given the sluggish growth outlook. — CNBC’s Michael Blum and Fred Imbert contributed to this report.
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