With midterm elections just around the corner, market data analytics firm ISS Stoxx has identified several cash cow stocks that could offer stability to investors. The upcoming elections, where Democrats are favored to gain at least one chamber of Congress, may lead to legislative gridlock, making quality stocks particularly appealing.
ISS Stoxx applied its Economic Value Added (EVA) framework to screen the Russell 1000 for stocks that exhibit high profitability and low risk. Casey Lea, global director of quantitative research at ISS Stoxx EVA, noted that quality stocks have historically generated significant alpha following midterm elections when a Republican president loses control of Congress.
Among the highlighted stocks, PepsiCo stands out as a Dividend King, having increased its dividend for over 50 years, although it has faced challenges in the U.S. market due to inflation and rising gasoline prices. Analyst Michael Lavery from Piper Sandler maintains an overweight rating on PepsiCo, citing strong international growth.
Bank of New York Mellon has seen a nearly 40% increase in its shares this year, with Bank of America recommending it as a buy due to its strong business model and limited credit risk. Lastly, Visa has been recognized as a high-quality compounder, with a recent price target increase from Bank of America suggesting further upside potential.
Overall, these stocks may provide a buffer against market volatility as the political landscape shifts in the coming months