An Unexpected Way To Profit From Rate Hikes
Things are changing in America. In fact, change will likely be the single word best describing the next several years in future history books.
We are expecting a new presidential administration with grand visions of a thriving domestic economy. There will be a House and Senate united under a single-party majority, and business and personal income taxes are expected to be slashed.
All these changes combine to create an economy supercharged with expansion. And all of this growth will be incredibly beneficial to the American people.
However, to economists and investors, there will likely be a dark side to such rapid expansion.
This dark side will be the Federal Reserve aggressively stepping in to slow the growth via interest rate increases. Rates have already started to ease higher, as evidenced by the 0.25% advance last December, in response to a successful fiscal stimulus program.
We all know that higher interest rates are thought to slow economic growth and strengthen the U.S. dollar. However, don't despair. Opportunities will abound in a climbing-rate environment.
Stock market investors can profit from a climbing interest rate environment by going long greenback ETF's like PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP ). Other sectors that can benefit from climbing rates are insurance and banking. Companies like Bank of America (NYSE: BAC ) and Aetna (NYSE: AET ) come to mind.
While the above stocks will likely profit from climbing rates, I have identified an under-the-radar, backdoor method to benefit from the coming rate upheaval.
As you know, I love finding backdoor ways to profit from economic trends. While everyone else is jumping on the obvious stocks that will profit from the coming changes, my preference is to look a little deeper and wider for stocks that will benefit despite, perhaps, not having a direct correlation.
Make no mistake, there is no macroeconomic reasoning that this company should benefit greatly from the coming changes. It is a psychological, mass-behavior reason that I think this company will continue to prosper due to the fear of rising rates. In the stock market, psychological reasons and perception can be even stronger than macroeconomic, quantifiable reasons.
The company I am referencing is Bankrate Inc (NYSE: RATE ) , a publisher of market and financial information. The company boasts a nearly $930 million market cap with annual revenue of close to $413 million. It just posted strong third-quarter results, and I firmly think that it will continue to prosper into the future.
My primary investment thesis is that as things change and rates climb, a continuing influx of new readers/clients will utilize Bankrate's products and services. A sure-to-expand customer base means one thing for this company: greater profits!
Bankrate has over forty years of experience in financial publishing. The first newsletter that was distributed contained much of the same rate research and information the company is known for and respected for today.
In 1996, Bankrate expanded its offerings and made its online debut as Bankrate.com. Since that time, the company has increased site traffic to over 15 million monthly unique visitors, grown its distribution outlets, and added new content channels in a never-ending effort to assist the consumer.
Bankrate.com is a leading collector and distributor of financial rate information. Its collection method includes constant surveys of about 4,800 financial institutions in all 50 states to provide clear, objective, and unbiased rates to consumers. The company provides free rate information to consumers on more than 300 financial products, including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans, and online banking fees.
In addition to rate data, Bankrate publishes original and objective personal finance content to help consumers make better informed financial decisions.
Hundreds of print publications depend on Bankrate as the trusted source for financial rates and information, including leading newspapers such as The Wall Street Journal , USA Today , The New York Times, and The Los Angeles Times .
Bankrate posted a strong third quarter with total revenue of $128.8 million, up 29% from the third quarter of 2015. Credit card customer inquiry revenue increased 54% versus third quarter of 2015, while mortgage customer inquiry revenue increased 35% versus third quarter of 2015.
At the same time, net income posted at $10.7 million, representing earnings per share of $0.12. Adjusted net income in the third quarter of $19.8 million represented earnings per share of $0.22.
Also, adjusted EBITDA was $38.5 million, up 9% versus third quarter of 2015.
Taking a bullish posture, Bankrate has raised guidance for the full year ending December 31, 2016: revenue is expected to be in the range of $438 million to $443 million and adjusted EBITDA is projected to be in the range of $114 million to $116 million.
" The strategic initiatives we outlined at the start of 2016 are progressing well. We have a great team and are excited to continue on the path towards sustainable long-term sales and profit growth, " commented Kenneth S. Esterow, President and CEO of Bankrate.
Bankrate is thriving even before the significant economic changes take place. I firmly think there is nowhere for these shares to go but higher.
At its core, Bankrate is a high-tech publishing company. All high-tech firms face the danger of an innovative product or service taking market share.
Action To Take: Shares have been sharply upward-trending. Go long on an upside break of $10.35 per share. Initial stops are suggested at $8.17 per share, and my target price is $19.50 per share.
Editor's Note: Unfortunately, investors who blindly follow Wall Street will miss out on their share of the $1.3 trillion world-changing opportunity Elon Musk is pioneering. Because while the Street is so busy harping on Tesla failures, they're missing how Musk's other master plan can line investors' pockets with huge profits. If you trust Wall Street, this is NOT for you... but if you believe there's more money out there than they're willing to let you in on, then grab the full details on how you can take your share of this earth-shattering opportunity .
- It's Time To Start Preparing For The Upcoming Bear Market
- Find Better Stocks, Faster, With These 2 Rules
- Two Outside-The-Box Emerging Market Investments
© Copyright 2001-2016 StreetAuthority, LLC. All Rights Reserved.