Investors are staring right into the teeth of several major unknowns. First up is the outcome of NAFTA and global trade conditions more broadly following the G-7 debacle this past weekend. Then there is a highly-anticipated Fed meeting this week, where chair Jerome Powell — who has been no friend to the market — will hike rates and possibly strike a hawkish tone (again). To round out the concerns is the aftereffect of Trump’s meeting with North Korean dictator Kim Jong-un.
With the outcomes of these key events uncertain, the market’s next move is far from a known quantity. Hence, it’s more important than ever for investors to stick with financially sound companies. Now isn’t the time to trade garbage.
“In the equities market, tightening financial conditions should drive the continued out-performance of stocks with strong balance sheets,” stresses Goldman Sachs strategist David Kostin. In 2018, Goldman’s list of 50 companies with strong balance sheets has outperformed the weak balance sheet basket by eight percentage points (8% vs. 0%).
Says Kostin, “In our base case, a healthy economy will lead the Fed to tighten financial conditions, lifting interest costs. If economic growth slows, however, currently healthy interest coverage ratios will weaken as earnings decline. Both environments should benefit firms with strong balance sheets.”
Below is Goldman’s list of 50 companies with strong balance sheets for you to scour.
Here are 10 names that stick out as potential out-performers from the list: