As Wall Street surveys for potential risks heading into September, some large-cap firms with strong balance sheets could offer investors each downside protection and even some growth, says Morgan Stanley. Within the second quarter, certain firms within the Russell 1000 maintained healthy money balances, at the same time as they fortified their businesses by putting money toward share buybacks, capital expenditures and acquisitions, in line with a Tuesday report. Corporations in the massive cap index overall are maintaining a healthy 4.8% money/enterprise value ratio, the note read. Meanwhile, the money balance dropped to $2 trillion within the second quarter, down from $2.1 trillion in the primary quarter. “We expect firms with fortress balance sheets to make the most during this time of turmoil, buying back their stock at higher valuations and/or acquiring businesses at discounted prices,” Morgan Stanley strategist Todd Castagno wrote. The investment firm screened for a basket of stocks that might help investors weather volatility and even spend money on some growth. These names within the Russell 1000, excluding financials, real estate and utilities, have cash-to-enterprise values greater than 3%. Moreover, they’ve an estimated free money flow growth rate greater than 5% on a compounded annual growth basis over the subsequent two years, in addition to a greater than 10% return on invested capital in each of the subsequent two years. In addition they have investment grade credit rankings. Listed below are 10 names: Megacap tech stock Alphabet met the standards for the list with its strong money balance and liquidity. It has a money/enterprise value of 6.7%. The stock is down 25% this yr. Consumer discretionary stock Dollar Tree has a money/EV ratio of three.2%. The stock lost nearly 2% this yr. Ulta Beauty has a money/EV ratio of three.1%, and is anticipated to stay resilient amid higher inflation and an economic slowdown. Ulta ticked down just 0.4% in 2022. Visa has a money/EV ratio of 4.1%. Visa shares are off 7% this yr. Other stocks included on this list include Booking Holdings , Ross Stores , Qualcomm , Accenture , Skechers and Nike .
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