The stock market may drop much further.

During the sell-off, Goldman’s advice to clients was to buy stocks with a “margin of safety.”

According to Goldman Sachs’ chief U.S. equity strategist David Kostin, the stock market could fall even further, and investors should look for stocks that have the support to hold steady.

Stock futures pointed to a brutal start on Monday, following Wall Street’s worst week since January. The sell-off comes as investors grow increasingly concerned about a recession as the Federal Reserve attempts to combat sky-high inflation.

In the event of a recession, Wall Street earnings estimates are far too optimistic, and stocks could fall significantly from here, according to Kostin in a note to clients over the weekend.

A recession, on the other hand, does not affect every stock in the same way. Investors should look for dividend payers and stocks with a “margin of safety,” or stocks that “trade at valuations below past bear market lows even after theoretical EPS haircuts,” according to Goldman.

Moving Markets

Many energy companies have pledged to focus on shareholder returns, which may help support stock prices and dividend growth even if the economy slows and oil prices cool.

Other stocks on the list, on the other hand, have underperformed the market this year. Best Buy is down 29.4% year to date, while T. Rowe Price is down more than 40%.

One advantage for Best Buy is that the retailer already reduced its guidance last month, implying that the stock is already being repriced by investors.

T. Rowe Price, on the other hand, has an appealing dividend yield of more than 4%. The stock is already trading well below its March 2009 price-to-earnings valuation and only slightly above its level.

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