Jefferies created lists of 10 stocks that may benefit from rising rates and 10 that may suffer.
Now that the Federal Reserve has indicated that it will likely start raising interest rates in March, which stocks should you consider buying, and which should you avoid?
Jefferies created a list of 10 stocks for each side of that equation — stocks that may benefit from rising rates and stocks that may suffer from rising rates, CNBC reports.
For the list of stocks that may benefit, Jefferies chose non-financial companies with a market capitalization greater than $10 billion that have a strong positive correlation with the 10-year Treasury yield and real yield since 2010.
The roster includes American Airlines (AAL) – Get American Airlines Group, Inc. Report, Caterpillar (CAT) – Get Caterpillar Inc. Report, Deere (DE) – Get Deere & Company Report, ConocoPhillips (COP) – Get ConocoPhillips Report, FedEx (FDX) – Get FedEx Corporation Report, General Electric (GE) – Get General Electric Company Report, General Motors (GM) – Get General Motors Company Report, Honeywell (HON) – Get Honeywell International Inc. Report, Marathon Petroleum (MPC) – Get Marathon Petroleum Corporation Report, and Pioneer Natural Resources (PXD) – Get Pioneer Natural Resources Company Report.
For the list of stocks that may suffer, Jefferies used the same criteria, but with the opposite correlation from the positive list. It chose non-financial companies with a market capitalization greater than $10 billion that have a strong negative correlation with the U.S. 10-year bond yield and real yield since 2010.
The roster includes American Tower (AMT) – Get American Tower Corporation Report, Amgen (AMGN) – Get Amgen Inc. Report, Chipotle Mexican Grill (CMG) – Get Chipotle Mexican Grill, Inc. Report, Clorox (CLX) – Get Clorox Company Report, Colgate-Palmolive (CL) – Get Colgate-Palmolive Company Report, Eli Lilly (LLY) – Get Eli Lilly and Company Report, General Mills (GIS) – Get General Mills, Inc. Report, Hershey (HSY) – Get Hershey Company Report, PepsiCo (PEP) – Get PepsiCo, Inc. Report and Zscaler (ZS) – Get Zscaler, Inc. Report.
As for American Airlines, Morningstar analyst Burkett Huey puts fair value at $19.50, compared to its recent quote of $15.81.
“No-moat-rated American Airlines restored its network to a greater extent than peers during the fourth quarter, but increased fixed-cost utilization has not brought operating margins above zero just yet,” he wrote last week.
