These U.S. stocks could suffer most from stagflation, Barclays says
By Vivien Lou Chen
The specter of waning U.S. demand combined with persistent inflation is adding up to the potential for a stagflationary environment that could hit some well-known stock names, according to one Wall Street bank.
Two names at or near the top of the list are Kimberly-Clark (KMB) and Procter & Gamble (PG), according to a note from Barclays strategists Stefano Pascale, Anshul Gupta, Riddhiman Dass and Tejas Shah on Tuesday. Kimberly-Clark's brands include Scott toilet paper, Kleenex facial tissue and Huggies disposable diapers. Procter & Gamble's products include Pantene shampoo, Crest toothpaste, and Olay skin care.
The selection of consumer-staple companies seems a bit counterintuitive because they are considered to be part of the defensive sector, where consumers tend to keep buying products when times are tight. Ball (BALL), a provider of aluminum packaging, is also near the top of the list at Barclays as a representative of the materials sector, which is cyclical and tends to underperform when the economy is struggling.The line of thinking at Barclays (UK:BARC) starts with the idea that the primary headwind in a stagflationary environment "would come from margin pressure driven by negative operating leverage," the strategists said. The materials sector, in particular, is exposed to waning pricing power after having enjoyed sales that were about 20% above pre-pandemic levels during the fourth quarter of last year, they said.
"At the single stock level, KMB (Kimberly-Clark), BALL (Ball) & PG (Procter & Gamble) top our long put screen of high-flying names with cheap vol that stand to lose the most in a stagflationary environment," the strategists at Barclays wrote.
On Tuesday, U.S. stocks DJIA SPX COMP finished mostly higher, with the Dow Jones Industrial Average rising for a fifth straight day. Shares of Kimberly-Clark closed down by less than 0.1%. Meanwhile, Ball and Procter & Gamble shares advanced by 0.5% and 0.8%, respectively.
-Vivien Lou Chen
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
05-07-24 1617ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
These Stocks Are (Still) Powering the Bull Market
-
5 Undervalued Energy Stocks to Play the AI Data Center Demand Boom
-
After Earnings, Is Lowe’s Stock a Buy, Sell, or Fairly Valued?
-
5 Stocks With the Largest Fair Value Estimate Cuts After Q1 Earnings
-
10 Stocks With the Largest Fair Value Estimate Increases After Q1 Earnings
-
Markets Brief: Inflation Back in the Spotlight
-
AI Is Booming, but Consumer Spending Is Slowing. Which Will Prevail in the Stock Market?
-
What’s Happening In the Markets This Week
-
3 Dividend Stocks for June 2024
-
After Earnings, Is Alibaba Stock a Buy, Sell, or Fairly Valued?
-
MongoDB Earnings: Slashing Valuation as Execution and Macro to Blame for Lower Guidance
-
Marvell Earnings: We Raise Our Medium-Term AI Forecast and Bring Our Valuation Up to $75
-
Zscaler Earnings: Impressive Traction in Emerging Products Drives Sales Growth for the Quarter
-
Dell Earnings: Raising Valuation on Strong AI, but the Stock Remains Severely Overvalued
-
After Earnings, Is Nvidia Stock a Buy, Sell, or Fairly Valued?
-
The 10 Best Companies to Invest in Now