"Although stocks in the U.S. and Europe have partially bounced back from the sharp selloff sparked by the U.K. referendum result, risks remain prevalent. [Analyst] Keith Parker foresees further equity downside alongside a prolonged market bottoming process, during which positioning is likely to turn much more defensive at active managers.
"With this in mind, our stock screen this week highlights Overweight-rated stocks that screen defensively based on sector and equity beta but are also expected to generate superior ROE and free cash flows in FY1.
"Our screen considers the following factors: i) Large-cap (US $5 billion+) stock in the consumer staples, utilities, telecom or healthcare sectors. ii) Adjusted beta less than 1.0. iii) Rated Overweight by Barclays equity research. iv) 15%+ ROE and 4.5%+ FCF yield expected in FY1, based on Barclays estimates."
Dutch food retailer Royal Ahold (OTCQX:AHONY) and Belgium's Delhaize (NYSE:DEG) have confirmed they are in talks about a possible $25B merger that could also create one of the largest supermarket operators across the Atlantic.
Despite being based in Europe, both companies generate about 60% of their sales in the U.S.
Ahold operates the Stop & Shop and Giant chains, as well as online grocery store Peapod, while Delhaize operates the Food Lion and Hannaford banners.