Companies with stronger balance sheets may give investors a leg up when markets become tumultuous — and Wolfe Research has a few stocks that could fit the bill. A combination of disappointing tech earnings, uncertainty around the presidential election this November and an imminent rate-cutting cycle sent investors scurrying out of megacap tech titans and into their smaller counterparts. But companies with stronger balance sheets are generally less susceptible to market sell-offs, and can even receive a boost from a lower interest rate environment. Against this backdrop, Wolfe Research searched for stocks with a high free cash flow yield — that is, a comparison of a company’s free cash flow to its market capitalization. Free cash flow refers to the amount of cash leftover after a company has paid its expenses. A higher free cash flow yield means the company is generating more cash, which it can then reinvest back into its business for further growth. Here are some stocks from Wolfe Research’s list from companies in the top quintile of free cash flow yields: Casino and resort operator Las Vegas Sands has an approximate free cash flow yield of 7% in 2024. Shares are down 19% this year. Wells Fargo analyst Daniel Politzer recently reiterated his overweight rating on the stock, although he does see some near-term setbacks. His price target of $58 implies that shares could rise roughly 44% from their Wednesday close. “We are Overweight, but acknowledge LVS may be more suited for investors w/ duration/appreciation for capital return than those seeking NT upside from Macau [gross gaming revenue] re-accelerating,” the analyst wrote. With an estimated 2024 free cash flow yield of 5%, Lockheed Martin also made the list. Shares of the aerospace and defense giant are up 15% in 2024. Lockheed Martin closed more than 5% higher on Tuesday after the company surpassed earnings and revenue expectations in the second quarter. TD Cowen upgraded the stock to a buy rating from hold this week, noting the company’s improving fundamentals. “We see L/MSD F-35 sales growth in 2025-27 as sustainment grows with the fleet and delivery payments catch up. In addition, the F-16 has a backlog of 125 planes and is ramping from 2/mo. to 4/mo. by H2:26. Both programs should see uptrending profitability, and they’re a combined 28% of sales,” wrote analyst Cai von Rumohr. Technology giant International Business Machines was another name from the basket. IBM has an estimated 2024 free cash flow yield of 6%. Shares are up nearly 18% in 2024. The company posted beats on the top and bottom lines in the second quarter. Bank of America reiterated the stock as a buy . “IBM reported a mixed F2Q with revenue and FCF exceeding expectations as Software and Infrastructure outperformed, while Consulting was weaker. The upside was partly driven by strong Transaction Processing revenues while areas like RedHat were weaker,” the bank wrote. Other names on the list included General Mills , Bath & Body Works and Delta Air Lines .
