Companies with stronger balance sheets can give investors an advantage when markets are in turmoil, and Wolf Research has some stocks that fit that bill. A combination of poor performance from technology companies, uncertainty surrounding this November’s presidential election, and an impending interest rate cut cycle has investors fleeing big tech companies and moving money into smaller companies. But companies with stronger balance sheets are generally less vulnerable to market sell-offs and may even benefit from a low interest rate environment. Against this backdrop, Wolf Research looked for stocks with high free cash flow yields, which is the ratio of a company’s free cash flow to its market capitalization. Free cash flow refers to the amount of cash a company has left after paying its expenses. A high free cash flow yield means a company is generating more cash, which it can reinvest in its business to drive further growth. Here are some of the stocks from Wolf Research’s list that rank in the top quintile of free cash flow yields. Casino resort operator Las Vegas Sands has a free cash flow yield of about 7% in 2024. Its shares have fallen 19% this year. Wells Fargo analyst Daniel Politzer recently reiterated his overweight rating on the stock but sees some pullback in the near term. His $58 price target suggests the stock could be up about 44% from Wednesday’s closing price. “We are overweight, but acknowledge that LVS may be better suited for investors seeking sustainability/upside in capital returns than for investors seeking NTD upside from Macau.” [gross gaming revenue] “The economy is accelerating again,” the analyst wrote. Lockheed Martin, with an estimated 5% free cash flow yield in 2024, also made the list. The aerospace and defense giant’s shares will rise 15% in 2024. Lockheed Martin closed more than 5% higher on Tuesday after second-quarter profit and sales beat expectations. TD Cowen raised the company’s rating to “buy” from “hold” this week, noting the company’s improving fundamentals. “We expect L/MSD F-35 sales to increase in 2025-27 as fleet maintenance expands and delivery payments catch up. In addition, the F-16 has a backlog of 125 aircraft, which is expected to increase from two per month to four per month by the 26th of the second half of the year. “Profitability is trending upwards for both programs, which together account for 28% of sales,” analyst Kai von Rumor wrote. Technology giant International Business Machines also made the list. IBM is estimated to have a 6% free cash flow yield in 2024. Its shares have risen nearly 18% in 2024. The company beat expectations for second-quarter sales and profits. Bank of America renewed its buy recommendation on the stock. “IBM had a mixed second quarter, with sales and free cash flow beating expectations, driven by strength in software and infrastructure and weakness in consulting. The gains were driven in part by strong transaction processing sales, offset by weakness in categories such as Red Hat,” the bank wrote. Other names on the list include General Mills, Bath & Body Works, and Delta Air Lines.
Amid a broader market sell-off, these stocks have strong balance sheets.
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