Apple, Intel and more: Jefferies just named its top 'cashflow machines' to beat stagflation

Published Mon, Nov 8 20211:12 AM EST

Analysts at Jefferies have named a number of global stocks they say could outperform as stagflation concerns rise . The list includes some of the world's biggest names in tech, semiconductors, healthcare and beyond. As the global economy emerges from the troughs of a Covid-induced downturn and an era of subdued oil prices, the global narrative has shifted from shoring up monetary and fiscal support to one of calibration and tapering. "The specter of persistently high inflation and oil prices, potential tapering (and higher rates) and a bear flattening of the yield curve are some of the main macro concerns," the analysts, led by Desh Peramunetilleke, wrote on Nov. 1. A unique combination of macro risks and supply-side shortages have created a perfect storm for stagflation — what economists describe as a period of economic stagnation and rising inflation. This rare phenomenon could already be looming as prices around the world continue to rise. U.S. consumer prices rose at their fastest pace in 30 years in September, while in the euro zone, inflation hit a new 13-year high in October. Global earnings growth momentum has failed to keep pace, however, with earnings revisions continuing to slow, Desh and his team noted. "While a 1970s type of stagflation is unlikely, we could see persistently-elevated inflation along with slowing growth, and there were five such periods since 2001," the analysts said. Cashflow machines Against this backdrop, Jefferies favors what it describes as "cashflow machines" and "dividend growers." Cashflow machines have historically performed the best in periods of stagflation, the analysts noted, while dividend growers are at "trough relative valuations" and are likely to benefit from resilient yields. To identify companies with strong cashflow, the investment bank screened for global stocks with high free cashflow yield and a "solid" balance sheet — the latter measured by the company's leverage and ability to service its debts. Stocks that score highly on these metrics include Apple , U.S. chip manufacturers Broadcom and Intel , Taiwanese semiconductor firm MediaTek , South Korean electronics giant Samsung Electronics , industrial giant 3M and China Telecom . Also making the list are a plethora of retail stocks, including consumer goods titan Unilever , French cosmetics firm L'Oréa l, Swiss luxury goods retailer Richemont , Japanese retailer Fast Retailing and home improvement retailer Lowe's . Dividend growers Jefferies also screened for "dividend growers," focusing on stocks that have sustainable dividends and a strong track record of increasing them. The investment firm's picks include household names such as Starbucks and Coca-Cola , consumer electronics firm Best Buy , industrial giant Honeywell and medical device company Medtronic , The list also includes Swedish technology firm Assa Abloy , Japanese telecommunications firms Nippon Telegraph and KDDI , alcoholic beverages firms Asahi Group and Wuliangye Yibin . Taiwanese semiconductor firm Taiwan Semiconductor Manufacturing Co. , financial services firm AIA , China Merchants Bank and Indian consultancy services provider Tata Consultancy also feature on Jefferies list of dividend growers.

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