It is time to buy defensive stocks ahead of further commodities weakness, in keeping with Goldman Sachs. Analyst Duffy Fischer initiated coverage of chemicals firms Sherwin-Williams and Linde with buy rankings, saying the paint and coating manufacturer and industrial gas firm can weather a recessionary environment. “[We] consider Street earnings expectations need to come back down meaningfully on weak demand especially on commodity firms. … Thus, we’re more positive on defensive stocks,” Fischer wrote in a Thursday note. Industrial gas firm Linde has a “best in school operation and a multi-decade record of compounding value” that can profit from an inflationary environment, and in addition get a lift from more hydrogen opportunities under the Inflation Reduction Act, Fischer said. The analyst set a $338 price goal for the corporate. It’s 24.5% above where shares closed Wednesday at $271.59. Linde was up 1.3% in Thursday premarket trading. “Industrial gases (IG) have a history of defensiveness IGs take-or-pay contracts and resilient end-markets enable these firms to generally outperform during downturns,” read the note. Coating manufacturer Sherwin-Williams is a “top stock idea” with a solid business model that remains to be taking market share, in keeping with the analyst. Meanwhile, a customer backlog would also ease the impact from any softness within the housing market. The analyst’s 12-month price goal of $280 implies roughly 39% upside from Wednesday’s closing price of $201.51. The stock is up 0.6% within the premarket Thursday. “Coatings best positioned as selling prices have risen significantly on cost inflation, and raw materials are beginning to rollover turning that price into margin. This margin expansion is our top idea,” Fischer wrote. “It isn’t a recent thesis, the market bought into it at the tip of 2020. … The market appears to have uninterested in this thesis right before it inflects favorably, in our view,” he added. —CNBC’s Michael Bloom contributed to this report.
© Newspaper WordPress Theme by TagDiv