3 Stocks That Are Thriving With Higher Rates

Rising rates are a headwind for most stocks. However, for a handful, they are leading to a boom in profits. Here are 3 stocks that benefit from the highest rates: Human (HUM), Everest RE (RE) and Silvercrest Asset Management (SAMG).

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2022 has been a brutal year for the stock market. YTD, the S&P 500 is down more than 22%. And, there seems to be no catalyst to turn things around, as the economy is slowing and the Fed is embarking on its most aggressive hiking campaign in decades. If inflation were to slow, rising credit spreads and falling asset prices would likely cause the Fed to notice. However, in this circumstance, this is not the case. In some ways, the tightening of the Fed is having the desired effect, as financial assets are the main channel that shows the effectiveness of the policy.

Similarly, by 2020 it could be argued that if asset prices did not rise, the Fed was not doing enough to support the economy. It can be argued that if the markers of financial and economic stress do not increase, the Fed is not fully engaged in the battle against inflation. Regardless of the theory, it is clear that until inflation begins to moderate, this political path will continue.

Growth stocks are likely to perform lower with rising rates, as are cyclical stocks due to lower economic growth. One market pocket that goes well is companies that see their profits increase due to rising rates in the short term. Here are 3 of these actions:

Silvercrest Asset Management (SAMG)

SAMG offers asset management advice to family office services in the United States. These services include financial advice to wealthy individuals and families and investment fund management.

YTD, SAMG is up 4.5%, while the S&P 500 is down 23%. The main reason is that SAMG’s earnings and income are not so much affected by changes in economic or monetary conditions. In any case, these services become more valuable during these periods. In addition, the company’s customers are more isolated from these factors than other segments of the population.

The other reason for SAMG’s superior performance is that the increase in short-term rates is positive, as the company has a decent amount of cash and short-term investments that it manages for its customers. Thus, the company is getting more returns from this cash that flows directly to the end result.

Beyond that, SAMG is attractive for its 3.8% dividend yield and very low term P / E of 8.8. Given these positive aspects, it is not surprising that SAMG has an overall rating of A, which translates into a strong buy in our POWR ratings system. A-rated stocks posted an average annual return of 31.1%, which compares favorably with the average annual S&P 500 gain of 8.0%. Click here to see the full SAMG POWR ratings.

Humana (BRUNZIT)

HUM is a health insurance company based in Louisville, Kentucky. The company had created a niche by specializing in government-sponsored programs. Almost all of his medical affiliations came from individual and group Medicare Advantage, Medicaid, and the Army Tricare program. The company is also a leader in autonomous prescription drug plans for seniors enrolled in traditional Medicare pay-per-service. The firm also offers other health services, such as primary care services and pharmacy benefit management.

The company’s Medicare business is well on its way to growth in the foreseeable future. Acquisitions have been another engine of growth. Purchases from Family Physicians Group, Your Home Advantage, Curo, and a stake in Kindred at Home have helped HUM strengthen its reach in the home health and hospice market.

HUM has a P / E ratio of 18.0, a P / S ratio of 0.63 and an effective P / S ratio of 11. They are quite impressive as they are willing to excel in this difficult environment. In addition, its solid balance sheet and large cash holdings will isolate investors from a slump in the economy or rising interest rates.

The company has an A rating, which equates to a strong purchase for POWR ratings. In terms of component qualifications, HUN has a Quality B due to its strong financial position and stable income. It is in classification A Medical – Medical insurance group that ranks 16th in 124 sectors. Click here to see HUM’s full POWR ratings.

Everest Re Group, Ltd. (RE)

RE is a reinsurance and insurance insurer in the United States, Bermuda, and international markets with most of its operations in the United States. The company is divided into 4 segments: US Reinsurance; International; Bermuda; and Insurance segments. Its products include a range of reinsurance and property and casualty insurance coverage.

Insurance stocks are also a good option in volatile market conditions. On the one hand, their business is much more stable, as the demand for insurance does not change much. In addition, these companies have large cash holdings that invest in short-term securities, so they benefit from the increased rates.

So it’s no surprise that RE is outperforming with a 2% YTD drop, which is significantly better than the S&P 500’s 23% YTD drop. In addition, Wall Street analysts predict revenue growth. 21.1% and revenue growth of 19.6%.

This growth is especially impressive considering its very low advanced P / E of 6.5. The company also pays a dividend of 2.5% and has a history of steady increases. Given these bullish fundamentals, it’s no surprise that stocks have an overall B rating, which equates to a purchase in our proprietary rating system. B-rated stocks posted an average annual return of 21.1%, which compares favorably with the average annual S&P 500 gain of 8.0%. Click here to see more of RE’s POWR scores.

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HUM shares traded at $ 449.98 per share on Wednesday afternoon, up $ 1.00 (+ 0.22%). For the year, HUM has decreased by -2.82%, compared to an increase of -20.51% in the S&P 500 benchmark index over the same period.

About the author: Jaimini Desai

Jaimini Desai has been a writer and financial reporter for almost a decade. Its aim is to help readers identify risks and opportunities in the markets. He is the chief growth strategist for StockNews.com and the publisher of the POWR Growth and POWR Stocks Under $ 10 newsletters. Learn more about Jaimini’s background, along with links to his latest articles.


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