Often the reason Wall Street takes a liking to a specific stock or sector is the momentum is there to drive it higher. The problem with that is, when momentum stocks run out of gas, they can sell off much faster than they went up. Sometimes there are metrics Wall Street uses that can be invaluable tools when looking for safety in a stock investment, and momentum is not one.
In a new report from the Global Equity Strategy team at Credit Suisse, we found one section that was fascinating: “The U.S. New Gold Standard” screen of stocks. These are stocks with yields more than the U.S Treasury 10-year bond and credit default swap (CDS) spreads that are below U.S government debt.
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The “Gold Standard” screen produced four U.S. stocks. For those looking for safety, yield and growth potential, these could be the four best stocks to buy now. The stocks had to yield more than the 2.56% the 10-year bond is at and have a CDS spread of less than 0.165%, which is what U.S. debt is at. The lower the CDS spread on a bond, the safer the market perceives it.
Here are the four Gold Standard stocks from Credit Suisse. Only one is rated Outperform by the firm, two are Neutral and one is not covered.
Analog Devices Inc. (ADI) is still trading well below the highs for the year printed in early June, and it rolled over again late in August trading. Investors may have a very good entry point at current levels. Wall Street analysts are very positive on the prospects for growth in communications driven by wireless base stations and TD deployments in China. They also see recovery in the industrial sector and growth in the automobile markets over the next year, both of which would benefit Analog Devices.
Analog Devices investors are treated to a very competitive 3% dividend. The Thomson/First Call consensus price target is $57.08. The stock closed Wednesday at $49.63 a share.
Exxon Mobil Corp. (XOM) is the country's biggest oil company and one of the most profitable corporations in the world. It is also the largest market cap company in the energy sector. Exxon has operations in every continent but Antarctica. Its oil and gas operations range across several states, from Pennsylvania to Colorado, and it also has wells in the Gulf of Mexico and off the California coast. Exxon produces nearly 50% more gas than its closest competitor. Daily production is over 3.5 billion cubic feet.
Exxon pays investors a 2.85% dividend. The consensus price target for the stock is $102.89 and Exxon shares closed on Wednesday at $97.08.