Pedestrians pass in front of the Las Vegas Sands Corp. Venetian resort in Las Vegas, Nevada, U.S., on Tuesday, April 24, 2018. An agreement by Japanese lawmakers on casino guidelines will favor the building of larger resorts in big cities that could benefit operators such as MGM Resorts International and Las Vegas Sands Corp. Photographer: Bridget Bennett/Bloomberg via Getty Images
Bridget Bennett | Bloomberg | Getty Images
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Amid a vaccine-driven rebound in stocks, Goldman Sachs said these shares can lead the charge thanks to their potential for a rebound in cash flow in 2021.
“With investor attention centered around macro recovery and the recent rotation into value, we look at both of these through a cash ﬂow lens. We focus on the trajectory of free cash ﬂow, factoring in both ﬁnancial proﬁtability (Margin) and valuation (Yield),” Goldman Sachs analyst Deep Mehta said in a note to clients.
To capitalize on this, Goldman is focusing on equities that its analysts expect will turn cash ﬂow proﬁtable in 2021or recover from a recent cash ﬂow downturn.
Free cash flow is net income minus capital expenditures, which amounts to what’s left over to spend on growing the business or returning money to shareholders. This money can be used for acquisitions, paying off debt or reinvestment.
Goldman Sachs screened for stocks that are well-positioned for a positive cash ﬂow inﬂection in 2021, which should drive the companies’ stocks, they believe. The firm made a list of buy-rated stocks with negative free cash flow in 2020 that are expected to inflect high in 2021 and 2022.
“While some stocks on the list are ramping towards achieving cash ﬂow proﬁtability, others are recovering from a cash ﬂow downturn in 2020,” Mehta told clients.
Take a look at Goldman’s list here.