Report by Trivariate Research

Trivariate Research's latest report analyses FCF trends of US corporates, both yield and conversion, efficacy of the signal and opportunities that may surface when financial conditions tighten. Key findings include: 1) FCF yield works in SMID cap and middle quality best. 2) From a sector perspective, it is effective in Machinery; volatile in Healthcare. 3) FCF yield matters more when financial conditions are loose. As soon as it begins tightening, de-emphasizing FCF yield and focusing on FCF conversion to pick winners from losers in “junk stocks” is prudent. 4) Quantitatively derived longs include Cigna, Cummins and Centene. Shorts include Elevance Health, Humana and Xylem.