21 stocks set to surge as companies spend billions buying their own shares, according to Deutsche Bank

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21 stocks set to surge as companies spend billions buying their own shares, according to Deutsche Bank

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Nacho Doce/Reuters

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Several companies have said they plan to spend the gains from tax cuts on paying debt, capital investments, dividends, and buying back their stocks.

In recent years, share buybacks have been a key source of support for the stock market's gains. In 2018, buybacks are on pace to break their previous annual record, adding up to about $800 billion, JPMorgan analysts estimated.

"Our projection of a notable inflection in buybacks should provide a significant boost to the demand-supply gap and buybacks alone drive price gains of 12% to around our year-end target of 3000 for the S&P 500," said Binky Chadha, Deutsche Bank's chief global strategist, in a note on Tuesday.

But buybacks won't profit all stocks equally, Chadha added. His note included a list of companies with characteristics that have helped investors predict buyback announcements, and which lead to outperformance afterwards. These are high free-cash-flow yield, low capex relative to sales, high return on equity, low debt leverage, and strong price momentum.

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"The basket has historically outperformed the S&P 500 (+4.8pp a year) and other simple buyback strategies (+3pp)," Chadha said.

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General Dynamics Corp.

General Dynamics Corp.

Ticker: GD

Industry: Aerospace & Defense

Market Cap: $68.28 billion

Deutsche Bank Rating: N/A

Robert Half International

Robert Half International

Ticker: RHI

Industry: Professional Services

Market Cap: $7.52 billion

Deutsche Bank Rating: Buy

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Boeing

Boeing

Ticker: BA

Industry: Aerospace & Defense

Market Cap: $208.63 billion

Deutsche Bank Rating: N/A

Varian Medical Systems

Varian Medical Systems

Ticker: VAR

Industry: Health Care Equipment & Supplies

Market Cap: $11.55 billion

Deutsche Bank Rating: N/A

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Gilead Sciences

Gilead Sciences

Ticker: GILD

Industry: Biotechnology

Market Cap: $105.74 billion

Deutsche Bank Rating: Buy

Amerisourcebergen

Amerisourcebergen

Ticker: ABC

Industry: Healthcare Providers & Services

Market Cap: $21.75 billion

Deutsche Bank Rating: Buy

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UnitedHealth Group

UnitedHealth Group

Ticker: UNH

Industry: Healthcare Providers & Services

Market Cap: $218.14 billion

Deutsche Bank Rating: Buy

Cigna

Cigna

Ticker: CI

Industry: Healthcare Providers & Services

Market Cap: $173.36 billion

Deutsche Bank Rating: Buy

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Centene

Centene

Ticker: CNC

Industry: Healthcare Providers & Services

Market Cap: $102.66 billion

Deutsche Bank Rating: Buy

Abbvie

Abbvie

Ticker: ABBV

Industry: Biotechnology

Market Cap: $119.29 billion

Deutsche Bank Rating: Hold

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Anthem

Anthem

Ticker: ANTM

Industry: Healthcare Providers & Services

Market Cap: $232.80 billion

Deutsche Bank Rating: Hold

Humana

Humana

Ticker: HUM

Industry: Healthcare Providers & Services

Market Cap: $272.50 billion

Deutsche Bank Rating: Hold

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Valero Energy

Valero Energy

Ticker: VLO

Industry: Energy

Market Cap: $94.32 billion

Deutsche Bank Rating: Hold

VF Corp

VF Corp

Ticker: VFC

Industry: Textiles, apparel and luxury goods

Market Cap: $73.59 billion

Deutsche Bank Rating: N/A

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Omnicom Group

Omnicom Group

Ticker: OMC

Industry: Media

Market Cap: $73.73 billion

Deutsche Bank Rating: N/A

Ross Stores

Ross Stores

Ticker: ROST

Industry: Specialty retail

Market Cap: $29.43 billion

Deutsche Bank Rating: Buy

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Home Depot

Home Depot

Ticker: HD

Industry: Specialty retail

Market Cap: $212.72 billion

Deutsche Bank Rating: Buy

Marriott

Marriott

Ticker: MAR

Industry: Hotels, restaurants, and leisure

Market Cap: $51.22 billion

Deutsche Bank Rating: Hold

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Gap

Gap

Ticker: GPS

Industry: Specialty retail

Market Cap: $12.86 billion

Deutsche Bank Rating: Hold

Michael Kors Holdings

Michael Kors Holdings

Ticker: KORS

Industry: Textiles, apparel, and luxury goods

Market Cap: $9.34 billion

Deutsche Bank Rating: Hold

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Best Buy

Best Buy

Ticker: BBY

Industry: Specialty Retail

Market Cap: $21.58 billion

Deutsche Bank Rating: Hold