Markets are grappling with recession fears and the prospect of sticky inflation. Market veterans have been warning that stubbornly high inflation could trigger a recession this year. And some predict that earnings-per-share estimates have further to fall. But there’s a way to protect your portfolio — buy shares in companies with resilient margins, Goldman Sachs said in a recent note. Gross margin is one closely watched profitability metric. It can be used to determine a company’s pricing power (in other words, its ability to maintain or raise prices without reducing demand), making it particularly important in times of inflation. CNBC Pro screened FactSet for stocks expected to have gross margins of more than 50% this year, and predicted to rally by the same magnitude. They also got a “buy” from at least 40% of analysts who cover them. These are 10 global stocks under the MSCI World index that meet those criteria. A few stocks in the screen stood out for the high analyst expectations they got on all three criteria. Cybersecurity firms CrowdStrike and Palo Alto Networks were two of them. Palo Alto’s CEO earlier said it was seeing tailwinds from customers looking to slash costs in the worsening economy. While CrowdStrike said earlier in December that new earnings growth had slowed , some investors were still optimistic on the stock. Josh Brown and Cathie Wood snapped up more of the stock , with Brown saying he views CrowdStrike as a long-term prospect. More than 80% of analysts covering those two stocks gave them a buy rating. And on the whole, analysts expect both firms’ gross margins to grow by more than 70% in 2023, according to FactSet. Wall Street has been particularly bullish on the cybersecurity sector this year even amid a volatile market. Two stocks in the list stood out not just for high expected gross margin growth and upside, but also for receiving a buy rating from all analysts who cover them, according to FactSet. They are Hong Kong-listed firms — shipping company SITC International Holdings and real estate services firm ESR Group . Match Group , which operates online dating platforms such as Tinder and Hinge, made the list. Analysts have been bullish on the stock, with KeyBanc Capital Markets and Piper Sandler giving it an overweight rating in December notes. KeyBanc noted that Tinder continues to lead the market in terms of its share of downloads in both North America and globally. “Specifically, Tinder has more global monthly downloads than Bumble and Hinge combined. We view this as a good demonstration of Tinder’s global scale and believe the brand will likely be the largest beneficiary of favorable trends in FX given international exposure,” KeyBanc analysts wrote. With travel resuming, online travel platform Expedia received one of the highest projections of gross margin growth in the year ahead from analysts — at about 85%, and 51% average upside, according to FactSet. Financial services firm BTIG gave Expedia a buy rating in a December note, and a price target of $150, or 72% upside.
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