Worried about a slowdown? One asset management firm shares a way to hedge — and names 10 global stocks
High-yielding stocks have been doing well despite rising interest rates, according to asset management firm AllianceBernstein. “Traditionally, high yielding stocks have been thought of as bond proxies and had historically underperformed the wider equity market in periods of rising rates. However, that relationship has flipped in recent years which is very important for income investors because it shows that equity yield can outperform even as bond yields rise and fixed income returns fall,” AllianceBernstein’s analysts wrote in an Oct. 24 note. The asset management firm said it’s “premature” to call a peak in rates or bond yields, adding that it expects rates to stay “high and stable” in the short term, and noted that European high equity yield has done well in “similar scenarios.” “We regard high equity yield as a more defensive and higher quality flavor of value which can act as a useful hedge against slowing growth or potentially a mild recession,” the analysts wrote. They define that form of value as “combined yield, a blend of dividend yield, free cashflow yield and net buyback yield.” They added that the strategy has done well in Europe so far this year, having returned 6.5% as of Oct. 18 — beating the 2% of its benchmark, the equal-weighted largest 300 stocks in the MSCI Europe, excluding financial stocks. “Combined yield has been the best performing of the long-short European factors that we track, year-to-date,” the analysts said. Stock screen AllianceBernstein performed a screen of “High Combined Yield Stocks” in Europe for the final quarter of the year. The following stocks that showed up were given “outperform” ratings. The list included two supermarket chains — Britain’s Tesco and Dutch-Belgian label Ahold Delhaize . Other companies that turned up on the screen include energy companies like Spain’s Repsol , France’s TotalEnergies , Norway’s Equinor and Britain’s BP . Equinor is listed on both the Oslo Stock Exchange and Nasdaq, while BP is traded on the London Stock Exchange and Frankfurt Stock Exchange. BP is also traded on the New York Stock Exchange in the form of American depositary shares. British arms manufacturer Bae Systems , German mail and parcel delivery company Deutsche Post , Swiss metals and mining label Glencore and British energy services company Centrica were also named. — CNBC’s Michael Bloom contributed to this report.
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