Put options, here are the stocks to hedge according to Goldman Sachs

John Marshall of Goldman Sachs' derivatives research team said in a note sent to clients Wednesday that buying put options on stocks that are likely to fall more than the overall market during a downturn could help mitigate the impact for investors.
Put options give investors the right to sell a stock at a predetermined price, and the trade is successful when the value of the stock falls below that price.
According to Goldman Sachs, such options could be relatively cheap for some more vulnerable stocks right now.
“During periods of market downturns, these quantitative methods tend to collapse as fundamentals become more important.
Our long-term studies have shown that Free Cash Flow is the most important fundamental metric to monitor when estimating downside skewness,” John Marshall said in the note.
Goldman Sachs has identified stocks trading above the company's price targets and with low or negative free cash flow.
“We view put options on these stocks as attractive for a stock market downturn,” Marshall added.
One large company on the list is Southwest Airlines.
The airline industry requires heavy capital investment, and Southwest Airlines' cash reserve shrank by $200 million last year after dividend payments.
However, the stock is up more than 50% since the beginning of November.
Another consumer-facing company that could face cash flow problems is Foot Locker.
The company said it had $187 million in cash and cash equivalents at the end of the third quarter, down more than 40% from the same period a year earlier.
Tech companies are also heavily represented on the list, but they're not just startups losing money.
Chipmaker Intel, with a market capitalization of more than $180 billion, is one of the largest stocks on the list.
The highly competitive semiconductor industry is another sector where companies are forced to spend large sums on capital investments.
Cybersecurity company Cloudflare is another stock on the list, where you need to spend to keep up with competitors in a competitive industry.
A smaller tech name on the list is training company Coursera.
This company reported a net loss of $116.6 million in 2023, with free cash flow of just $7.9 million.
None of the stocks listed have a buy rating from analysts at Goldman Sachs.
Southwest Airlines has a Neutral rating, while the other four stocks all have Sell ratings.
Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions.
The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.
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