The sell-off gives investors a deep discount on these high-quality stocks, says Bernstein

Published Wed, Mar 10 202112:21 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

The recent rotation in the stock market has left some high-quality names trading at prices that may be too good to pass up, according to investment firm Bernstein. Many of the best performing stocks in 2020 have stumbled so far this year, with many high-flying growth stocks coming back to earth as cyclical plays like energy stocks take their turn in the lead. However, that rotation has caused some companies to trade at relatively cheap prices, Bernstein's Ann Larson said in a note. "High-quality stocks are selling at historic discounts, already meeting or exceeding levels last seen during the financial crisis and before that in the aftermath of the tech bubble depending on what metric you choose to use," the note said. Two of the calculations used to show this were price-to-cash flow and price-to-earnings. The firm defines high-quality stocks as those in the top 20% of its quality model, which is based on a number of factors including earnings stability and debt ratio. Historically, names with those characteristics tend to be winners in the aftermath of a sell-off, Bernstein said. "Our previous research on 'Quality on Sale' shows that quality stocks rebound more quickly from sell-offs than lower quality stocks," the note said. The firm put together a list of stocks with high quality scores that are trading at least 10% below their 52-week high. The stocks on the list also have outperform ratings from Bernstein analysts. Bernstein's selections include some of the major tech companies, including Amazon and Facebook . Both stocks are in negative territory year to date and are 16.9% and 16.2%, respectively, below their recent highs. The stock on the list that is trading the furthest from its high-water mark is Nvidia , down more than 24%. Bernstein is far from the only investment firm bullish on Nvidia. The stock has buy or overweight ratings from 78% of its analysts, according to FactSet. For investors looking outside of the tech sector, retail giant Walmart also made the list. The stock held up better than the broader market during the Covid-induced sell-off last year, but shares have fallen roughly 12% over the past three months. Consumer software company Adobe and pharmaceutical giant Merck also made the cut, trading 21.5% and 15.5%, respectively, below their 52-week highs.

Cars drive past a Walmart store in Washington, DC, on August 18, 2020.

Nicholas Kamm | AFP | Getty Images

The recent rotation in the stock market has left some high-quality names trading at prices that may be too good to pass up, according to investment firm Bernstein.

Many of the best performing stocks in 2020 have stumbled so far this year, with many high-flying growth stocks coming back to earth as cyclical plays like energy stocks take their turn in the lead.

However, that rotation has caused some companies to trade at relatively cheap prices, Bernstein's Ann Larson said in a note.