Interest Rates and Dollar Going Higher in 2018: 5 Stocks to Buy Now

Investing

Published: December 18, 2017 7:25 am

Last Updated: January 12, 2020 5:22 am

The past year has been great for investors that poured money into the big U.S. multinationals, as those companies do a tremendous amount of sales overseas and were given the tailwind almost all year of a weaker dollar. That tailwind could be coming to an end as the Federal Reserve raised rates last week, and it could raise again as many as three, or even four times next year.

Higher interest rates should also mean a stronger dollar, and in a new research report Merrill Lynch sees a higher dollar as early as the first quarter of 2018. Now could be a good time to rotate from multinationals to companies that do almost all of their business in the United States. We screened the Merrill Lynch research database and found five companies rated Buy that fit the bill perfectly.

CBS

Shares of this large cap broadcaster have bounced nicely off the lows printed last month and still could be an incredible value. CBS Corp. (NYSE: CBS) may be in the best position of all the broadcast networks with an outstanding prime time lineup, solid sports franchises like the NFL, March Madness College Basketball, The Masters and other top programming, the venerable network could once again be an outstanding stock for shareholders.

The company is leading in the ratings and is poised to continue the network’s programming dominance in 2016. The broadcasting giant is now in the midst of a significant stock repurchase process, and many on Wall Street expect the company to shrink its share base by around 25% over the next two years.

CBS shareholders are paid a 1.26% dividend. The Merrill Lynch price target for the stock is $78, and the Wall Street consensus figure is $70.72. Shares closed trading Friday at $58.90.

Dominion Resources

Many of the Wall Street firms that we cover are very positive on this top utility. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and serves utility and retail energy customers in 13 states.

Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers on regulated natural gas distribution and storage.

Investors in Dominion Resources are paid a solid 3.63% dividend. Merrill Lynch has an $87 price target on the shares, while the consensus price target is at $81.86. The stock closed Friday at $84.91.

Home Depot

This remains the undisputed leader in the home improvement retail category. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.