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With tensions rising between Russia and Ukraine the JPMorgan Chase macro research team screened Tuesday for stocks facing positive and negative impacts from the situation.
“Russia-Ukraine tension is a low earnings risk for US corporates, but an Energy price shock amidst an aggressive central bank pivot focused on inflation could further dampen investor sentiment and growth outlook,” strategist Dubravko Lakos-Bujas wrote in a note. “US companies have low direct exposure to both Russia (~0.6% for Russell 1000 (NYSEARCA:IWB)) and Ukraine (<0.1%) based on disclosed revenues). Indirect risks are potentially more substantial, which could include slower global growth and consumer spending due to higher oil and food prices, negative second-order effects through Europe, supply chain distortions, credit and asset write-downs, and cybersecurity risks.”
“While the path of Russia-Ukraine crisis remains unclear with potentially elevated market volatility in the short-term, tightening monetary policy, in our view, still remains the key risk for equities as central banks attempt to aggressively re-anchor inflation expectations lower.”
For outperformers, the team “identified US companies exhibiting positive sensitivity to rising Russia/Ukraine” and “refined the list based on input from JPM Stock Analysts.”
“The screen is heavily tilted towards commodities (Energy + Materials) along with Aerospace/Defense.”
Energy: Exxon Mobil (NYSE:XOM), EOG Resources (NYSE:EOG), Pioneer Natural Resources (NYSE:PXD), Devon Energy (NYSE:DVN), Occidental Petroleum (NYSE:OXY), Cheniere Energy (NYSE:LNG), Hess (NYSE:HES), Diamondback Energy (NASDAQ:FANG), Continental Resources (NYSE:CLR), Marathon Oil (NYSE:MRO), APA (NASDAQ:APA)
Materials: Nutrien (NYSE:NTR), Mosaic (NYSE:MOS), CF Industries (NYSE:CF), Alcoa (NYSE:AA), Cleveland-Cliffs (NYSE:CLF), U.S. Steel (NYSE:X), Carpenter Technology (NYSE:CRS)
Industrials: Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC), L3Harris Technologies (NYSE:LHX), Huntington Ingalls (NYSE:HII), Mercury Systems (NASDAQ:MRCY), Leidos Holdings (NYSE:LDOS), CACI International (NYSE:CACI)
For underperformers, the team “identified companies with revenue exposure to Russia and Ukraine based on FactSet’s Revere database and proprietary textual analysis” and “further refined the list based on input from JPM Stock Analysts (e.g. effects of higher oil prices, supply chain, etc.).”
“The average direct revenue exposure of the basket is ~4%.”
Energy: Linde (NYSE:LIN), Kinross Gold (NYSE:KGC), Arconic (NYSE:ARNC), Sylvamo (NYSE:SLVM)
Industrials: Boeing (NYSE:BA), AGCO (NYSE:AGCO), Air Lease (NYSE:AL), Delta Air Lines (NYSE:DAL), United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL)
Consumer Discretionary: Gentherm (NASDAQ:THRM), Mohawk Industries (NYSE:MHK), McDonald’s (NYSE:MCD), Carnival (NYSE:CCL), PepsiCo (NASDAQ:PEP), Mondelez International (NASDAQ:MDLZ), Bunge (NYSE:BG), Philip Morris (NYSE:PM), Kimberly-Clark (NYSE:KMB), Estee-Lauder (NYSE:EL), Coty (NYSE:COTY), Herbalife Nutrition (NYSE:HLF)
Healthcare: Alnylam Pharma (NASDAQ:ALNY)
Info Tech: Fortinet (NASDAQ:FTNT), Trimble (NASDAQ:TRMB)
Russia ETFs are plunging with conflict poised to escalate.