The constant question on Wall Street and Main Street is when will the Federal Reserve start raising interest rates. Slow first-quarter, and most likely second-quarter, gross domestic product growth has some saying not until next year. Others say September, and a third group says December. Regardless of when it actually does occur, some industries and stocks are poised to benefit from higher interest rates.
A new report from top-notch Merrill Lynch strategist Savita Subramanian and her team points to segments that are inexpensive and are beneficiaries of rising interest rates. We cross-referenced those industries with the Merrill Lynch research coverage universe and found four top stocks to buy now.
This company is in the automobile industry and looks very inexpensive at current levels. Despite all the recall troubles, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades just below 8 times estimated 2015 forward earnings. Like Ford, GM has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago and grabbed a big chunk of what is now the world’s largest auto market.
With the company facing possible criminal charges over ignition switches, there will continue to be a headline risk cloud over the stock. Long-term, patient investors that can look beyond current issues may stand to make outstanding money on the auto giant.
GM investors are paid an outstanding 4.1% dividend. The Merrill Lynch price target for the stock is $51. The Thomson/First Call consensus price target is much lower at $41.80. Shares closed Friday at $35.70.
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