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Goldman says buy these five stocks in a weakening macro environment

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Analysts at Goldman Sachs named a slew of stocks this week that the firm said are well positioned if market conditions deteriorate. These companies have some defensive qualities and have long-term upside. CNBC Pro combed through Goldman Sachs research to find stocks that are stronger for longer. They include Yeti, Yum China , Keysight Technologies , Capri Holdings and Taiwan Semiconductor Manufacturing . Yeti Shares of Yeti have jumped since the company’s blowout earnings report back on Nov. 10. Analyst Brooke Roach said in a recent note to clients that she’s expecting the stock to continue its upward trajectory. Yeti demonstrated “solid demand growth in its DTC & wholesale channels, healthy international momentum, and strong broad-based growth across product categories,” she said. Roach praised the company’s robust pipeline of products and said the brand has shown remarkable resilience fighting through a tough macro. Shares are up 53% over the past month. “YETI highlighted 2022 as one of its most expansive years of innovation yet,” she added. Inventory remains challenged, but Roach said the company is working hard. She noted that the firm is seeing incremental improvement. Goldman Sachs has a price target of $51 per share and said the sky’s the limit for Yeti. “We stay buy,” Roach said. Yum China Yum China is a stock made for these times, according to analyst Michelle Cheng. Shares of the company, which operates fast food restaurants like KFC and Taco Bell in China, are up 11.2% this year. The company reported strong third-quarter earnings in early November, reinforcing its “leading execution and business resiliency amid market volatility,” Cheng wrote. “This is backed by the strong product innovation, flexible marketing strategies, and enhanced digital platform,” she added. The firm said margins are nearly back to pre-Covid levels as evidenced in Yum China’s latest quarterly report. Cheng also wrote that when market uncertainty is heightened, the company has successfully been able to cut costs with savings carried forward. Meanwhile, if same-store sales improved, the firm would see more margin upside. “We like Yum China for its leading position, nimble business model, mass market position, and strong execution which could lead to more steady operating results and market consolidation under the current volatile environment,” Cheng wrote. Keysight Technologies If the economy falters, own this stock, analyst Mark Delaney said. The electronic design and test solutions company reported a strong top- and bottom-line beat last month and that should delight investors, the firm wrote. “Strong results despite weakening macro,” Delaney said. Sales remain robust, according to the firm. Indeed, Keysight achieved record quarter and full-year orders and revenue in its latest reporting period. “We believe the report was better than investor expectations, especially orders which were a record for the quarter and stayed strong in October, in contrast to some competitors that recently reported that bookings had slowed,” he added. Delaney acknowledged that a teetering economy would result in some order moderation for the company, but ultimately he said the stock is too attractive to ignore. “While we expect FY23 revenue growth to be limited, and EPS could be down yoy on higher opex, we believe that Keysight is positioned to sustain strong fundamentals even in a slower macro environment,” he said. Shares of Keysight are up about 8% over the last month. Yeti “In the quarter, the company showcased resilience of demand, with solid demand growth in its DTC and wholesale channels, healthy international momentum, and strong broad-based growth across product categories. … We stay buy. … YETI highlighted 2022 as one of its most expansive years of innovation yet.” Keysight Technologies “Strong results despite weakening macro. … We believe the report was better than investor expectations, especially orders which were a record for the quarter and stayed strong in October, in contrast to some competitors that recently reported that bookings had slowed. … While we expect FY23 revenue growth to be limited, & EPS could be down yoy on higher opex, we believe that Keysight is positioned to sustain strong fundamentals even in a slower macro environment.” Capri Holdings “Demonstrating broad-based strength in a choppy macro. We step away from CPRI’s F2Q23 result with our positive view largely unchanged. While CPRI is experiencing incremental headwinds from Wholesale/FX/China, the company has been able to offset those pressures with outperformance in the rest of the business and incremental share buyback, driving unchanged FY23 EPS.” Taiwan Semiconductor Manufacturing “Attractive valuation with improving sentiment on geopolitical concerns. … Following improving sentiment, we would highlight that TSMC’s valuation appears to be attractive as the company is now trading at 13.1x/10.7x FY23E/FY24E, which is at the lower end of its trading history over the past 10 years. Our key investment thesis on TSMC remains unchanged as we continue to favor TSMC’s leadership position with its long-term growth opportunity underpinned by the structural industry trend. Yum China “YUMC delivered a strong margin beat in its 3Q22 results reinforcing its leading execution & business resiliency amid market volatility. … This is backed by the strong product innovation, flexible marketing strategies & enhanced digital platform. … We like Yum China for its leading position, nimble business model, mass market position, & strong execution which could lead to more steady operating results and market consolidation under the current volatile environment.”

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