Investing in the stock market can be a daunting task, especially with recent market volatility. But according to Strategas Securities, this pullback presents a unique opportunity to invest in high-quality stocks that are trading below their previous highs.
Chief investment strategist Jason De Sena Trennert believes that with volatility comes opportunity for long-term investors. He recommends looking for companies that are not dependent on external factors as the business cycle evolves. Trennert specifically looks for high-quality names with high-yield spreads and has provided a list of promising cash generative companies that meet the following criteria:
– Trading below their 52-week highs
– Free cash flow yields above 5%
– EBIT/total interest coverage ratios above 5x
One such company on Trennert’s list is energy giant Chevron, which has a total interest coverage ratio of 51 and a free cash flow yield of 6.3%. Despite being down 16% from its 52-week high, analysts are bullish on Chevron with an average price target suggesting a 23% upside potential.
Another stock to consider is Qualcomm, with a free cash flow yield of 5.6% and an interest coverage ratio of 13.9. Qualcomm is trading 29% below its 52-week high, but analysts believe there is a potential 30% rally in store for the chipmaker.
Match Group, the online dating platform, is also on Trennert’s list with a free cash flow yield of 10.7% and a total coverage ratio of 5.5. Even though shares are down 27% from their 52-week high, analysts predict a 25.4% climb from its current level.
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