Firms with robust stability sheets have a draw back cushion and may discover distinctive alternatives throughout a slowing economic system, based on Morgan Stanley. Companies with excessive quantities of money on their stability sheets can make the most of a slowing economic system by shopping for again their inventory or buying companies at discounted costs, mentioned Morgan Stanley strategist Todd Castagno. He mentioned these corporations also can generate substantial revenue from curiosity. Alternatively, corporations with floating-rate notes â which may transfer periodically to align with rate of interest adjustments â might want to begin earmarking money for excellent debt if the economic system slows. “We have recognized corporations with robust stability sheets and ample liquidity, that additionally generate extra returns over their value of capital,” Castagno mentioned in a notice to shoppers. “With ample liquidity and solvency to run operations and repair debt, these shares ought to have higher draw back safety than the common.” Traders have been more and more centered on the power of company stability sheets amid rising considerations that the Federal Reserve’s sequence of rate of interest hikes might tip the U.S. economic system right into a slowdown or recession. Castagno screened the Russell 1000 , apart from financials, actual property and utilities, to seek out corporations with fortress-like stability sheets. Here is the factors used: Money-to-enterprise worth above 2.5% Optimistic free money stream compound annual progress charges over the subsequent two years Greater than 7.5% return on invested capital anticipated within the subsequent two years Ratio of present property to present legal responsibility larger than 1 Low leverage ratio with debt-to-equity beneath 2.5 Funding grade credit standing Optimistic fairness Here is 10 that made the listing: Health retailer Nike made the listing with a cash-to-EV at practically 7%. The corporate’s debt-to-equity ratio, in the meantime, got here in at 1.5. The inventory has gained 2.9% to date this 12 months, regaining some floor after shedding practically 30% in 2022. The inventory was additionally on the minds of friends on Wall Avenue. On Sunday, BMO analyst Simeon Siegel reiterated his outperform ranking on the inventory regardless of some questions. “We proceed to favor NKE’s measurement and scale as long-term aggressive benefits however stay involved over hopes for significant margin progress,” he mentioned. NKE YTD mountain NKE in 2023 FedEx had one of many highest shares of money in contrast with complete enterprise worth at 7.7%. The delivery firm mentioned final week that it will mix supply models as a part of a $4 billion cost-cutting initiative. Hasbro was one other firm on the listing that has aimed to trim prices. The toymaker mentioned it will lay off round 1,000 staff, or 15% of its workforce , because it grappled with weak vacation gross sales. However the information has not helped the shares equally. Whereas FedEx has jumped round 33% this 12 months after dropping 33% final 12 months, Hasbro has constructed on 2022’s 40% selloff with a year-to-date lack of practically 15%. Protection inventory Northrop Grumman , in the meantime, is one inventory with a robust stability sheet that has moved reverse of the broader market. The inventory has fallen 13.1% in 2023, giving again a few of its 41% acquire from final 12 months. By comparability, the S & P 500 has added 6.9% this 12 months after tumbling 19.4% in 2022. NOC .SPX 5Y mountain Northrop Grumman in contrast with the S & P 500 Life sciences provider Thermo Fisher additionally made the listing. Morgan Stanley famous the corporate has a debt-to-equity ratio of lower than 1 and cash-to-enterprise worth of three.5%. Thermo is amongst corporations vying for Baxter ‘s biopharmaceutical unit, Reuters reported final month. Thermo Fisher additionally opened a producing facility close to the College of California, San Francisco medical campus as a part of a joint try from the college and firm to advance cell therapies for difficult-to-treat situations. Thermo Fisher has superior nearly 3% this 12 months, a comparatively modest acquire in comparison with the S & P 500. â CNBC’s Michael Bloom contributed to this report.