Strategas Securities said the recent broader market pullback into quality stocks has created an entry point. Despite last week’s volatility, the S&P 500 managed to recoup most of its losses, closing the week down just 0.04% on Friday. Still, many stocks are trading below their highs from earlier this year. “With volatility comes opportunity,” chief investment strategist Jason De Sena Trennert wrote in a note on Monday. “We believe this is an opportunity for long-term investors to add exposure to those that continue to trade as the business cycle Investing in companies that are growing and no longer relying on the ‘kindness of strangers.'” Trennert said he prefers high-quality stocks with high yield spreads that leave little room for error. With that in mind, strategists have put together a list of promising cash-generating companies. Here are his screening criteria: Free cash flow yield above 5% off 52-week high EBIT/total interest coverage above 5x Take a look at some of these names and where analysts think they’ll go next. Energy company Chevron has the highest total interest coverage ratio at 51. As of Monday morning, the stock was down 16% from its 52-week high, according to Strategas. Wall Street is bullish on Chevron. The LSE said the average price target implies an upside of about 23% from Monday’s closing price, with most analysts rating the stock a strong buy or buy. Chevron’s free cash flow yield is 6.3%. Qualcomm is another quality stock that became severely oversold during last week’s plunge. The stock is currently trading 29% below its 52-week high. Analysts surveyed by London Stock Exchange Group (LSEG) said shares could rise nearly 30% from current levels based on consensus price targets. The chip maker has a free cash flow yield of 5.6% and an interest coverage ratio of 13.9. Nearly 70% of analysts have given the stock a Strong Buy or Buy rating. Qualcomm shares fell nearly 1% on Monday after Wolfe Research downgraded its rating to peer perform from market outperform. The company believes the use of Apple’s internal modems will have an impact on the company. QCOM YTD mountain Qualcomm will take a stake in online dating platform Match Group in 2024 is another company selected. The company has a free cash flow yield of 10.7% and a total coverage ratio of 5.5. Shares are down 27% from their 52-week high and are down about 7.5% year to date. Still, analysts polled by London Stock Exchange Group (LSEG) believe the stock could rise 25.4% from current levels. About three-fifths of analysts covering the company have buy or strong buy ratings. —CNBC’s Michael Bloom contributed to this report.
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