Investing

5 Safe Stocks to Buy as Fed Resumes Interest Rate Hikes

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The Fed, as widely expected, hiked interest rates by 25 basis points on Jul 26, and indicated more hikes in the near term. The Fed has now increased interest rates for the 11th time since March 2022, making mortgages and other loans expensive.

Although inflation has been cooling over the past year, it is still elevated, which could prompt the Fed to go for more interest rate hikes. Understandably, the crisis is far from over, and the possibility of more rate hikes has once again raised concerns that the economy could slip into a recession.

The recent rate hike has now taken the benchmark interest rate, the federal funds rate, to the 5.25-5.50% range, to hit its highest point since March 2001. This increase in interest rates has resulted in more expensive borrowing, pushing up the cost of purchasing a new car or house. It has also made credit cards more expensive to carry.

The hike came even though inflation showed signs of easing. Inflation eased for the 12th consecutive month in June. The Consumer Price Index rose 3% in June after increasing 4% in May, the lowest level since March 2021.

Inflation now stands at 4.8% compared to a 40-year-high of 9.1% last year. However, it is still elevated and much higher than the Fed’s target of 2%.

Unfortunately, interest rate increases aren’t good for the economy, which is currently facing the threat of an impending recession. Rate hikes have an effect on consumer spending patterns, raise borrowing costs, and hinder economic growth.

However, investors should not panic. Instead, they should focus on investing in stocks that offer risk-adjusted returns like Ingredion Incorporated INGR, Consolidated Water Co. Ltd. CWCO, Lamb Weston Holdings, Inc. LW, Entergy Corporation ETR and FirstEnergy Corp. FE.

These stocks belong to the consumer staples and utility sectors that are non-cyclical, meaning their businesses are not heavily influenced by market fluctuations. These stocks are also dividend players, indicating better quality businesses that have the ability to withstand market volatility. Moreover, they are low-beta stocks with a range between 0 and 1, making them less volatile than the overall market.

Our Choices

Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.

Ingredion Incorporated has an expected earnings growth rate of 22.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.4% over the last 60 days. INGR presently sports a Zacks Rank #1 (Strong Buy). Ingredion Incorporated has a beta of 0.76 and a current dividend yield of 2.56%.

Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.

Consolidated Water has an expected earnings growth rate of 81.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the last 60 days.Consolidated Water Co has a beta of 0.27 and a current dividend yield of 1.68%.CWCO presently sports a Zacks Rank #1.

Lamb Weston Holdings, Inc. is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.

Lamb Weston’s expected earnings growth rate for the current year is 7.1%. The Zacks Consensus Estimate for the current-year earnings has improved 1.4% over the past 60 days. LW currently has a Zacks Rank #2 (Buy). Lamb Weston has a beta of 0.54 and a current dividend yield of 1.10%.

Entergy Corporation is primarily engaged in electric power production and retail distribution of power. ETR has 30,000 megawatt (MW) of generating capacity, including more than 8,000 MW of nuclear fuel capacity.

Entergy Corporation has an expected earnings growth rate of 4.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ETR currently has a Zacks Rank #2. Entergy Corporation has a beta of 0.64 and a current dividend yield of 4.10%.

FirstEnergy Corp. is a diversified energy company. Through its subsidiaries and affiliates, FE engages in the transmission, distribution and generation of electricity.

FirstEnergy has an expected earnings growth rate of 5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 60 days. FE currently has a Zacks Rank #2. FirstEnergy Corp has a beta of 0.45 and a current dividend yield of 3.90%.

Entergy Corporation (ETR): Free Stock Analysis Report

FirstEnergy Corporation (FE): Free Stock Analysis Report

Ingredion Incorporated (INGR): Free Stock Analysis Report

Consolidated Water Co. Ltd. (CWCO): Free Stock Analysis Report

Lamb Weston (LW): Free Stock Analysis Report

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