Investors looking to shore up their portfolios in this volatile market should look into buying companies with strong free cash flows, according to Morgan Stanley. Free cash flow theoretically measures the amount of cash a business will have left after paying operating expenditures. Morgan Stanley found that in the last 12 months, operating cash flows have increased nearly 5% on the year to $2.2 trillion, and capital expenditure spending increased by more than 18% to $786.1 billion.
"Cash rich companies with high free cash flow yields should also have better downside protection, while providing longer-term upside potential if management is able to deploy cash effectively." Morgan Stanley also made a list of companies with strong free cash flows ranging from 10% to nearly 30% as ideas for investors, though the bank notes that individual assessment is warranted before buying any of the names.
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