CEOs have been busy warning investors to brace themselves for what could be the worst first quarter in years, with earnings season kicking off this week.
Since December 24, stocks have surged more than 23% higher, making Q1 the best start to a year for stocks since 1998. But now investors are facing an earnings decline of 4.2%, the first loss in more than two years, compared to a 12% rise in the fourth quarter.
Slowing global demand and climbing costs are weighing on bottom lines and are hurting sales, leaving investors with few places to reap a profit.
But Goldman Sachs has a few tricks up its sleeves for beating the market during what could become a tough trading environment as negative earnings reports roll in.
Analysts at the firm looked at four of the 50-stock baskets in its secret portfolios—with proprietary themes including companies with low labor costs, large dividends, and growing sales—that they believe will continue to do well in an economic and earnings slowdown. They then narrowed down their list to 30 stocks that have many of these traits and overlap at least two of their baskets.
According to Goldman’s chief U.S. equity strategist, David Kostin, all four of the secret portfolio baskets are outperforming the S&P 500 so far in 2019. In a note to clients, Kostin wrote that the 30 stocks the analysts identified all boast more than one defensive trait that could help these companies withstand the pressure from slowing global growth and rising costs.
Several of the super stocks Goldman’s analysts identified are in the information technology space, including names like semiconductor manufacturer Texas Instruments (NASDAQ: TXN), domain name registry service VeriSign (NASDAQ: VRSN), and digital payments service Western Union (NYSE: WU).
Of these names, other analysts are most bullish on AT&T and their average price target for the stock is $36.32, indicating possible upside of nearly 13% over the next twelve months. Just last week, Desjardins set their price target for T at $56.50 – 75% higher than Thursday’s closing price.