If any investor has stood the test of time, it is Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws thousands of loyal fans who are investors. Known for his long buy and hold strategies and his massive portfolio of public and private holdings, Buffett remains one of the preeminent investors in the entire world.
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This week, everyone on Wall Street anticipates the first increase in the federal funds rate in years, and yields across the Treasury curve have all spiked after a recent round of buying last month prompted by the Russian invasion of Ukraine. In fact, both the five-year and 10-year notes hit 52-week yield highs on Monday. Top strategists are anticipating six to seven total increases this year, and perhaps three next year, depending on the inflation numbers, which have been at 40-year highs.
While most companies are not fans of higher rates, as they increase borrowing costs and the overall cost of doing business, some sectors welcome moves higher. We screened Warren Buffet’s Berkshire Hathaway portfolio looking for stocks that are likely beneficiaries of higher rates. These five are rated Buy at major Wall Street firms, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
American Express
This stock has backed up recently and is offering the best entry point since late last year. American Express Co. (NYSE: AXP) provides charge and credit payment card products and travel-related services worldwide. Its products and services include payment and financing products network services accounts payable expense management products and services, and travel and lifestyle services.
The company’s products and services also comprise merchant acquisition and processing, servicing and settlement, point-of-sale marketing and information products and services for merchants, and fraud prevention services, as well as the design and operation of customer loyalty programs. It sells its products and services to consumers, small businesses, midsized companies and large corporations through mobile and online applications, third-party vendors and business partners, direct mail, telephone, in-house sales teams and direct response advertising.
Shareholders receive a 1.24% yield. Morgan Stanley has a $218 price target on American Express stock, while the consensus target is lower at $183.63. The shares closed trading on Monday at $172.79, up close to 3% for the day.
Bank of America
The company posted very solid fourth-quarter results, and Warren Buffett owns a stunning 1.1 billion shares. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
The bank has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Shareholders receive a 2.08% dividend. J.P. Morgan’s $53.50 target price is higher than the $51.36 consensus target on Bank of America stock. The shares closed on Monday at $41.20.
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Mastercard
This continues to be one of the top credit card players in the world. Mastercard Inc. (NYSE: MA) is a global payments provider that operates one of the largest payment processing networks, connecting billions of consumers, millions of merchants, and thousands of financial institutions in more than 210 countries. Its brands include Mastercard, Maestro and Cirrus.
The company also provides value-enhancing offerings such as loyalty and rewards programs, information services and consulting. According to Nilson estimates, Mastercard is the third-largest global credit and debit network, as measured by volume.
Small businesses and individuals having a hard time entering the digital economy are getting a boost from Mastercard as the need to receive funds electronically and make digital and contactless payments has been underscored by the COVID-19 pandemic.
The company has pledged to connect 1 billion people and 50 million small businesses to the digital economy by 2025. This commitment is an extension of its 2015 promise to bring 500 million people who have no ready digital access to financial products into the system.
Mastercard stock investors receive a 0.60% dividend. The $449 Morgan Stanley price target compares with the $430.56 consensus and the closing share price on Monday of $328.59.
24/7 Wall St.Marsh & McLennan
Typically, insurance companies are not affected by increases in interest rates, and this is one of the strongest companies in the industry. Marsh & McLennan Companies Inc. (NYSE: MMC), a professional services company, provides advice and solutions to clients in the areas of risk, strategy and people worldwide.
Its Risk and Insurance Services segment offers risk management services, such as risk advice, risk transfer and risk control and mitigation solutions, as well as insurance and reinsurance broking, catastrophe and financial modeling, and related advisory services, and insurance program management services. This segment serves businesses, public entities, insurance companies, associations, professional services organizations and private clients.
Marsh & McLennan’s Consulting segment provides health, wealth, and career consulting services and products. It also offers specialized management, as well as economic and brand consulting services.
Shareholders receive a 1.38% dividend. Jefferies has set a $175 target price. The consensus target is $171.77, and the final Marsh & McLennan stock trade on Monday was reported at $150.04.
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Wells Fargo
This large-cap bank is perhaps the best solid value play for 2022. Wells Fargo & Co. (NYSE: WFC) a diversified financial services company, provides banking, investment, mortgage and consumer and commercial finance products and services in the United States and internationally.
Its Consumer Banking and Lending segment offers diversified financial products and services for consumers and small businesses. Financial products and services include checking and savings accounts, and credit and debit cards, as well as home, auto, personal and small business lending services.
The Commercial Banking segment provides financial solutions to private, family-owned and certain public companies. Its products and services include banking and credit products across various industry sectors and municipalities, secured lending and lease products and treasury management services.
The Corporate and Investment Banking segment offers a suite of capital markets, banking and financial products and services to corporate, commercial real estate, government and institutional clients. Products and services include corporate banking, investment banking, treasury management, commercial real estate lending and servicing, equity and fixed income solutions, as well as sales, trading and research capabilities services.
The Wealth and Investment Management segment provides personalized wealth management, brokerage, financial planning, lending, private banking and trust and fiduciary products and services to affluent, high-net worth and ultra-high-net worth clients.
Shareholders receive a 2.00% dividend. The Wells Fargo stock price target at Raymond James is $65. The consensus target is $63.09, and shares closed almost 3% higher at $49.86 on Monday.
Money center banks, credit card providers and insurance companies as a whole are actually helped by rising interest rates. Plus, these top companies are all among the best ideas in their respective sectors, and all pay very solid and dependable dividends to shareholders. Lastly, all are offering very solid entry levels after being caught up in the selling seen on almost all the trading days this year.
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