For Immediate Release
Chicago, IL -September 28, 2018 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Blue Hills Bancorp, Inc. BHBK , Berkshire Hathaway Inc. BRK.B , Apple AAPL , Tecnoglass Inc. TGLS and Northern Dynasty Minerals Ltd. NAK .
Here are highlights from Thursday's Analyst Blog:
Fed Issues Third Rate Hike of 2018: Top 5 Gainers
Adhering to its script, the Fed raised interest rates on Sep 26 and signaled another hike in December and three more next year. Policymakers are expected to raise rates gradually as they expect the economy to grow at a steady pace and inflation to remain stable and anchored.
With the Fed hiking rates and aiming for more increases this year, we expect financials, technology, home improvement suppliers and even gold to benefit. U.S. dollar also edged slightly higher after the Fed raised interest rates. Thus, small-caps with domestic focus are better poised to weather a stronger dollar.
Fed Lifts Rates
After the end of the two-day meet on Sep 26, the Fed hiked interest rates for the third time this year. Policymakers under Chairman Jerome Powell unanimously decided to hike the federal funds rate by 25 basis points to 2-2.25%. Rates are now at the highest levels since October 2008, just after the collapse of Lehman Brothers (read more: 5 Bank Stocks That Made the Most Since Lehman's Collapse ).
All the nine voting members of the FOMC voted in favor of rate hike. The Fed's so-called "dot plot", by the way, is showing that 12 officials now predict another quarter-point rate hike in December, up from eight officials in June. Looking ahead to next year, four Fed officials expect two rate hikes, four officials anticipate three and four officials see four hikes. And for 2020, almost all the officials predict one more rate hike.
The current decision was widely anticipated, thanks to strong economic growth, record low unemployment level and relatively stable inflation (read more: Fed Set to Raise Rates Again: Top 5 Winners ).
The Fed's median forecast, in fact, calls for economic growth of 3.1% this year, up from the 2.8% projection seen in June. At the same time, the Fed's latest policy statement does remove a long standing language of maintaining an "accommodative" monetary policy, suggesting that the Fed sees the present interest rate nearing the level required to sustain full employment and meet the Fed's desired inflation target of 2%.
Powell, in the meantime, did say that removal of the word "accommodative" doesn't indicate change in path of interest rates. He acknowledged that he particularly sees a bright moment for the economy and that he "expects further gradual increases in the target range for the fed funds rate."
Financials to Win Big
With the Fed raising interest rates and hinting at further hikes in the near term, financials stands to gain. Banks are definitely the go-to rate trade. Higher interest rates will boost bank profits as they increase the spread between what banks earn by funding longer-term assets, such as loans, with shorter-term liabilities.
Insurers, by the way, derive their investment income from investing premiums, which are received from policyholders in corporate and government bonds. Yields and coupons on these bonds rise in response to a rise in interest rates. This enables life insurers to invest their premiums at higher yields and earn more investment income, expanding their profit margins.
An increase in rates generally concurs during periods of economic strength and upbeat investor sentiments, which also bodes well for brokerage firms and asset managers.
Technology & Home Improvement Stand to Gain
Technology firms also stand to gain from a rate hike. Interest rates correlate with an economy that is getting stronger by the day and that could easily boost the bottom lines of smartphone makers like Apple Inc. (AAPL).
Rising rates may also compel would-be home buyers to stop looking for houses and instead improve their existing ones. Thus, home improvement majors like Lowe's Cos. (LOW) and Home Depot (HD) stand to gain.
Rising Rates Don't Affect Gold
There is a popular belief that a rise in interest rates makes bonds more alluring and thus money flows out of gold. But, a long-term trend shows that interest rates and gold prices don't have such a negative correlation. Such a correlation over the past half century has been only 28%, which is not significant.
And why not? The price of gold is not a function of interest rates. It is more of a function of supply and demand in the long term. Rising rates, in fact, at times turns out to be bullish for gold as it is simply bearish for stocks from sectors like utilities and home construction, to name a few.
Rate Hike Prospects Push Dollar Higher
The ICE U.S. Dollar Index, which measures dollar's strength against a basket of major currencies, initially slipped into negative territory after the rate hike announcement but bounced back to finish the day in the green. The index was last up 0.1% at 94.176 on Sep 26 and has been above the psychologically key 3% level since the beginning of April.
After all, prospects of a rise in federal funds rate results in a stronger U.S. dollar. The greenback continued to trend higher as currency traders have a tendency to be drawn toward currencies with attractive interest rates.
And a stronger dollar is good for small-caps. These companies are set to benefit from wider domestic revenue exposure, which insulates them from the effects of a stronger dollar. Meanwhile, companies that derive a lion's share of their earnings from overseas will be dealt the biggest blow. Such companies are exposed to foreign exchange risks between the United States and other countries they are operating in. Thus, if dollar gains strength, foreign sales of such companies are affected.
5 Winning Stocks
Given the aforesaid positives, we have selected five solid stocks from these winning areas that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Blue Hills Bancorp, Inc. operates as the bank holding company for Blue Hills Bank that provides financial services to individuals, families, small to mid-size businesses, government, and non-profit organizations in Massachusetts. Blue Hills Bancorp is predominantly domestic-focused as it operates through a network of 11 full-service branch offices located in Boston, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts.
The company currently has a Zacks Rank 1. In the last 60 days, one earnings estimate moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 8.7% in the same period. The company's expected earnings growth rate for the current year is 78.6% compared with the Banks - Northeast industry's estimated rally of 22%.
Berkshire Hathaway Inc. provides property and casualty insurance and reinsurance as well as life, accident, and health reinsurance.
The company currently has a Zacks Rank 2. In the last 60 days, three earnings estimates moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings rose 12.5% in the same period. The company's expected earnings growth rate for the current year is 68.9% compared with the Insurance - Property and Casualty industry's expected rally of 22.9%.
Apple designs, manufactures, and markets mobile communication and media devices, and personal computers for consumers, and small and mid-sized businesses.
The company currently has a Zacks Rank 1. In the last 60 days, 10 earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 2.8% in the same period. The company's expected earnings growth rate for the current year is 27.7% compared with the Computer - Mini computers industry's projected rally of 25%. You can see the complete list of today's Zacks #1 Rank stocks here.
Tecnoglass Inc. manufactures and sells architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries.
The company currently has a Zacks Rank 2. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings moved up 11.9% in the same period. The company's expected earnings growth rate for the current year is 106.3% compared with the Building Products - Retail industry's estimated rally of 25.8%.
Northern Dynasty Minerals Ltd. acquires, explores, and develops mineral properties in the United States.
The company currently has a Zacks Rank 2. In the last 60 days, one earnings estimates moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings rose 3% in the same period. The company's expected earnings growth rate for the next year is 300% compared with the Mining - Gold industry's projected rally of 18.8%.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Blue Hills Bancorp, Inc. (BHBK): Free Stock Analysis Report Tecnoglass Inc. (TGLS): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report Northern Dynasty Minerals, Ltd. (NAK): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research