As the market staged massive, volatile price swings Tuesday, Feb. 6, investors have begun wondering what the best stock picks are should a selloff stick around.
According to a note from RBC Capital Markets, the smartest picks are decidedly tech-skewed.
The two most common questions that RBC analysts get in the event of a downturn are what could happen to the firm's coverage universe given a moderation in growth or a correction in the stock market, and what stocks should investors own in a pullback.
According to RBC, the stocks with the most attractive setups in a market reset are Broadcom Ltd. (AVGO - Get Report) , Amphenol Corp. (APH - Get Report) , Apple Inc. (AAPL - Get Report) and CDW Corp. (CDW - Get Report) .
"Simplistically, we think most of stocks aren't factoring in a correction scenario based on current valuation -- hence the downside should we see a recession-type correction could be rather severe (although we aren't calling for this)," RBC wrote.
In the Great Recession from 2008 to 2009, Apple, Broadcom, International Business Machines Corp. (IBM - Get Report) and HP Inc. (HPQ - Get Report) had "impressive" margin protection, analysts said, although they might not all enjoy the same insulation in a growth moderation as they did in a recession given secular changes to the IT landscape.
From a peak-to-trough standpoint, RBC wrote, value IT hardware companies performed best with a peak-to-trough of about 50% to 60%. The companies in that group also reported "much narrower" multiple ranges when compared to semiconductor or electronic manufacturing services firms.
The "more severe" margin degradation headwinds in RBC's analysis of a hypothetical 2018 correction were at semi-cap companies that are more cyclical -- Qualcomm Inc. (QCOM - Get Report) , Maxim Integrated Products Inc. (MXIM - Get Report) and TE Connectivity Ltd. (TEL - Get Report) .
RBC added that dividend yields offer good support for companies. The best names in the high-yield group are Seagate Technology PLC (STX - Get Report) at about a 5% dividend yield, IBM with about 4%, Qualcomm with about 3.5%, Maxim with about 2.8%, Intel Corp. (INTC - Get Report) with about 2.6%, HP with about 2.5%, Texas Instruments Inc. (TXN - Get Report) with about 2.3% and Western Digital Corp. (WDC - Get Report) with about a 2.3% yield.