The list includes Exxon Mobil. J.P. Morgan also cited Russia-Ukraine underperformers, a list that includes PepsiCo.
J.P. Morgan strategists don’t see the Russia-Ukraine conflict as a big deal for U.S. stocks, but they have produced lists of “Russia-Ukraine outperformers” and “Russia-Ukraine underperformers.”
As for the big picture, “Russia-Ukraine tension is a low earnings risk for U.S. corporates, but an energy price shock amidst an aggressive central bank pivot focused on inflation could further dampen investor sentiment and [the] growth outlook,” the strategists, led by Dubravko Lakos-Bujas, wrote in a commentary.
The outperformer stocks are ones with indirect exposure to the conflict. The strategists selected companies with “positive sensitivity to rising Russia-Ukraine headline risk.” The list was “refined based on input from J.P. Morgan stock analysts.” The roster is weighted heavily toward energy, materials and aerospace/defense stocks.
Stocks on the roster include oil giant Exxon Mobil (XOM) – Get Exxon Mobil Corporation Report, oil producer EOG Resources (EOG) – Get EOG Resources, Inc. Report, aerospace/defense titan Lockheed Martin (LMT) – Get Lockheed Martin Corporation Report, its peer Northrop Grumman (NOC) – Get Northrop Grumman Corporation Report and phosphate and potash nutrients company Mosaic (MOS) – Get Mosaic Company Report.
The underperformer stocks have an average direct revenue exposure of 4% to Russia and Ukraine. The strategists also used input from J.P. Morgan analysts on issues such as effects of higher oil prices and the supply chain.
The stocks include food and beverage titan PepsiCo (PEP) – Get PepsiCo, Inc. Report, fast-food restaurant chain McDonalds (MCD) – Get McDonald’s Corporation Report, tobacco giant Philip Morris (PM) – Get Philip Morris International Inc. Report, U.K. industrial gas company Linde (LIN) – Get Linde plc Report, and jet maker Boeing (BA) – Get Boeing Company Report.
But the strategists don’t see the Russia-Ukraine spat as the driving factor for U.S. stocks. “While the path of Russia-Ukraine crisis remains unclear, with potentially elevated market volatility in the short-term, tightening monetary policy … remains the key risk for equities, as central banks attempt to aggressively re-anchor inflation expectations lower.”
