Top US Stocks Likely to Survive the Credit Crunch

During these times of economic uncertainty it is hard to know in which baskets you should be placing your eggs. If you are going to keep your investments in stocks and shares, then you need to chose the stocks most likely to weather the storm that is ravaging our global economy. Lucky for us, there are plenty of analysts and financial experts at hand to help us with our decisions. Here are the JPMorgan Top Picks 16 U.S. Stocks to Hold in a Recession:

JPMorgan’s stock tips include food giant McDonald’s Corp. and pharmaceutical company Merck & Co., that may outperform the U.S. stock market during the global recession it expects to unfold during
the next two years.

JPMorgan’s “Franchise 16″ list is a collaboration by JPMorgans’ finest stock analysts, and uses a top-down view that the banking crisis threatens global growth, according to Thomas J. Lee, chief U.S. equity strategist at the New York-based bank.

“There is growing demand from clients for core holdings that outperform in a global recession. Every week that passes that credit markets remain challenged, there’s incremental damage to the macro economy.” Thomas J. Lee, JP Morgan.

The stock prices of the group of shares increased by 1.2% today, compared with a 0.6% fall in the S&P 500 Index. The 16 companies, including Dow Jones Industrial Average components 3M Co., Hewlett-Packard Co., McDonald’s and Merck score high in three criteria, JPMorgan said.

“The requirements are low debt levels, return of cash to investors in the form of dividends or buybacks, and profitability. In addition, they’re viewed by the bank’s analysts as having the ability to prosper in a global slowdown. JPMorgan, the largest U.S. bank by market value, this week said the world economy is already in a recession and cut its global growth forecast for 2009 to 0.9% from 2.1%. Lee said the decision to compile the list was made two weeks ago, after the moved to fresh lows for the year that extended its year-to-date loss to 25 percent on Oct. 3. Since then, the main benchmark for U.S. equities has fallen a further 14 percent, deepening the loss to 36 percent.” Bloomberg.com

The Franchise 16 list is distinct from JPMorgan’s U.S. Analyst Focus List of researchers’ favourite companies among the 1,200 they cover. The new list includes 16 companies because cirrently these are the only ones that meet the criteria set out by JPMorgan to be able to be part of the credit crunch saver group. However, more stocks could be added if they show signs that they could also survive the crunch.

“We did it to provide something for clients to focus on beyond the distractions of current market conditions. Fundamental analysis of stocks in the past two weeks has been overwhelmed by de-leveraging, the seizure in the credit markets, and the fact that there’s almost no risk appetite.” Thomas J. Lee, JP Morgan.

The Likely Credit Crunch and Global Economic Downturn Survivors are:

1. 3M Co. - a diversified technology company
2. Baxter International Inc. - medical devices, pharmaceuticals and biotechnology
3. Colgate-Palmolive Co. - Oral Care products and pharmaceutical products for health professionals
4. CA Inc. - provider of information technology (IT) management software
5. Devon Energy Corp. - oil and gas exploration, development and production
6. General Mills Inc. - a manufacturer and marketer of branded consumer foods
7. Gilead Sciences Inc. - a biopharmaceutical company
8. Google Inc. - Internet search and web advertising
9. Hewlett-Packard Co. - a provider of products, technologies, software, solutions and services
10. McDonald’s Corp. - food service industry
11. Merck & Co. - pharmaceutical company
12. Monsanto Co. - provider of agricultural products for farmers
13. Nucor Corp. - steel and steel products
14. Philip Morris International Inc. - international tobacco company
15. Union Pacific Corp. - transportation business
16. Visa Inc - retail electronic payments network

What is striking about this list is that out of 16 companies, 4 are pure internet / IT companies (25% of companies), and the remaining are well spread in across all markets - e.g. fuels, pharmaceuticals, tobacco, transport, credit cards and industrial resources and health and beauty products.

Could it be that the dotcom companies that epitomised the 1990’s boom and bust period could actually save us during the current economic crisis?

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