Goldman Sachs is recommending investors consider buying puts on a basket of companies with weak fundamentals as a way to hedge against a potential market pullback. “We see rising investor interest in hedging near-term drawdown risks given equity markets are near all-time highs,” strategists wrote in a note to clients Wednesday. “While the options market prices based on trailing volatility, fundamentals gain a new importance in a broader sell-off,” they said. Goldman believes free cash flow remains the most critical indicator of downside resilience. To capitalize on this dynamic, Goldman identified a number of sell-rated stocks that have low- or negative free cash flow yields and meaningful downside to analysts’ price targets. “Several of our long-term studies have shown that Free Cash Flow is the most important fundamental metric to track in order to understand the potential for downside asymmetry,” they wrote. “In down-markets we observe significantly less downside support for companies with low FCF yield.” The group spans sectors from travel to biotech and includes names such as Southwest Airlines , Avis Budget Group , JetBlue and Hertz Globa l. Goldman said puts on these stocks appear “attractive to buy for a pullback in equities,” particularly given the relatively low pricing of options implied volatility compared with historical levels in some cases. The strategists argue that while broader hedges like index puts can be expensive, single-stock options on companies with limited fundamental support can offer a more targeted and cost-efficient way to protect portfolios in a downturn. ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
