As a cloak of unease shrouds the market, it might be time for investors to consider turning to quality stocks, according to Piper Sandler. “We believe general uncertainty and lack of a clear economic trajectory will persist into the foreseeable future. Thus, we continue to recommend overweighting quality fundamentals at a reasonable price in our Macro Select portfolio,” the investment firm wrote in a Tuesday report. Piper Sandler said it looks for stocks with the following characteristics: Attractive value: determined by high free cash flow yield Cash flow profitability: determined by high cash flow return on investment Realized growth: determined by high earnings per share growth Expected near-term growth: determined by a high earnings per share revisions ratio The strategy’s returns speak for themselves, with Piper Sandler’s Macro Select model sitting in the top decile of excess return in the past year. The strategy has also been able to successfully capture macro tailwinds since its 2018 inception, the firm said. Below are a few of the names in the S & P 1500 index that have newly moved into the “most attractive” rankings of Piper Sander’s Macro Select model in the last month. A ranking of 1 is considered most attractive. Communications services giant Verizon was included on the list, having moved to a rank of 2 from 6 in the current quarter. Analysts covering the stock are split on its rating, but see an average upside of 5.3%. Shares of Verizon have rallied nearly 13% this year. Last month, Redburn Atlantic Equities upgraded the stock to neutral from sell. “We remain Sellers of AT & T and TMUS, but upgrade Verizon to Neutral given improving subscriber trends, exposure to falling rates and healthy dividend cover,” the firm wrote. Piper Sandler also identified United Airlines as a quality stock to buy. The airline carrier stock moved to a ranking of 2 in the current quarter, from its previous ranking of 4. Despite rising almost 11% this year, the airline carrier has been hit with a series of woes regarding its fleet of Boeing aircraft. Shares of United Airlines slid 3.6% on Tuesday after the airline offered pilots unpaid time off , citing near-term delays in Boeing deliveries. This followed a slight selloff in late March after Reuters reported that the U.S. Federal Aviation Administration would step up its oversight of the company following recent safety incidents. Despite these recent setbacks, analysts covering the stock overwhelmingly have a buy rating. The average price target indicates that the stock could rise nearly 42%. Microsoft is another quality name that could win big, Piper Sandler said. The tech titan and “Magnificent Seven” member has done well this year, so far rallying 12%. It moved to a ranking of 2 in the current quarter from its previous 5. Microsoft stock rose on Monday after a report from The Information said that the company was planning a $100 billion data center project with OpenAI . The same day, Jefferies designated Microsoft as a “top AI winner,” saying it would be a key beneficiary in the space. Most analysts covering Microsoft have assigned it either a strong buy or buy rating, accompanied by a prediction of 9.4% upside to its average price target. — CNBC’s Michael Bloom contributed to this report.
