Companies with stronger balance sheets may give investors an advantage when markets are volatile, and Wolfe Research has a few stocks that fit that bill. Disappointing tech earnings, uncertainty over this November’s presidential election and an upcoming cycle of interest rate cuts have prompted investors to flee the big tech giants for smaller peers. But companies with stronger balance sheets are generally less vulnerable to market sell-offs and can even get a boost from a lower interest rate environment. Against this backdrop, Wolfe Research looks for stocks with high free cash flow yields — that is, a company’s free cash flow compared to its market capitalization. Free cash flow is the amount of cash a company has left after paying expenses. A higher free cash flow yield means the company is generating more cash, which can then be reinvested back into its business for further growth. Here are some stocks in Wolfe Research’s list of companies in the top quintile of free cash flow yields: Casino and resort operator Las Vegas Sands has a free cash flow yield of about 7% in 2024. Shares fell 19%. Wells Fargo analyst Daniel Politzer recently reiterated an overweight rating on the stock, although he does see some recent setbacks. His price target of $58 suggests shares could rise about 44% from Wednesday’s closing price. “We are overweight, but acknowledge that LVS may be more suitable for investors with duration/capital return accretion rather than those looking for NT$ upside from a reacceleration in Macau (Gross Gaming Revenue),” the analyst wrote. ” Lockheed Martin is also on the list, with a projected free cash flow yield of 5% in 2024. Shares of the aerospace and defense giant are set to rise 15% by 2024. TD Cowen upgraded the stock to buy from hold this week, citing improving fundamentals. “We expect L/MSD F-35 sales to grow in 2025-27 as sustainment capabilities grow with the fleet and delivery payments keep pace. Additionally, the F-16 backlog is 125 and is increasing from 2 to 4 per month. Another name in the basket is technology giant International Business Machines Corp., which expects a 2024 free cash flow yield of 6%. Up nearly 18%. Bank of America reiterated its buy rating on the stock. “IBM reported mixed second-quarter results, with software and infrastructure performing better than expected, revenue and free cash flow,” the bank wrote. It beat expectations, while consulting was weaker. Its gains were driven in part by strong transaction processing revenue, while others on the list include General Mills, Bath & Body Works and Delta. Delta Air Lines.
