Wall Street bank Citi has identified two stocks that it believes are well-positioned to thrive regardless of shifts in the interest rate environment or political landscape. Citi’s research comes ahead of the Federal Reserve’s potential interest rate cut later this month and the upcoming U.S. elections in November. The investment bank said three areas within the green sector â clean water, energy efficiency, and nuclear energy â are “less rate/politics sensitive” and attractive for investors, in a note to clients on Aug. 30. Ecolab , a Minnesota-based water purification and hygiene firm and infrastructure engineer firm IDEX are the two stocks added to its “Thematic 30” recommended list. “Rate and political catalysts alone are unlikely to sustain “Green” stocks medium-term,” said Citi analysts led by Drew Pettit. “Therefore, we focus on three key fundamental characteristics: positive cash flow, visible profitability, and sales/EBITDA growth acceleration.” Both Ecolab and IDEX are described by Citi as having “positive free cash flow” and being “profitable,” with sales and earnings expected to grow through 2026. The Wall Street bank upgraded Ecolab to “buy” from “neutral” in July with a $265 price target. Meanwhile, IDEX is expected to rise by about 35% to $277 a share over the next 12 months, according to Citi. ECL 1Y line Citi believes the fundamentals will matter more for stock market investors going forward as many clean energy stocks that rose into “micro bubbles” in 2021 have “completely unwound”. “A number have even filed for bankruptcy. Currently, more than 20 stocks are off more than -80% from their 5-year highs. A quarter of “Green” stocks are down -60% or worse from post-pandemic peaks,” the analysts said. The investment bank also sees the two stocks as being unaffected by any changes in the political landscape in November. “The Democratic platform contains a more supportive stance of long-run green initiatives, and policy that would force or accelerate the adoption of certain “Green” technologies,” the Citi analysts said. The bank’s analysts also believe that former President Donald Trump, who has been vocal about supporting the oil and gas industry, is unlikely to withdraw support for new energy firms and impact Ecolab and IDEX. “For Republicans, former President Trump has discussed a repeal of the Inflation Reduction Act (IRA), but we believe this is unlikely as a disproportionate amount of spending has flowed to Republican-controlled congressional districts. The complete attack on renewables seems more like campaign rhetoric as there is a need for near-term power increases in certain areas from growing data center electricity demand,” the analysts added.
Source Agencies
