Why Comfort Systems (FIX) Is a Sneaky-Good Play if Interest Rates Rise
Bonds are not a very good investment in the current interest rate environment.
Interest rates can't go much lower than they are right now. And on the flipside, If interest rates rise, the price is going to go to the floor.
But there are a handful of stocks out there that are good plays if interest rates go up. And the one we're going to talk about today might be the sneakiest interest rate play out there.
Comfort Systems (FIX) is a U.S.-based air conditioning and ventilation company.
And while this type of business isn’t the most obvious way to take advantage of higher interest rates, it indirectly benefits from their impact on the real estate market.
This is because as mortgage rates rise, they often price out prospective buyers. In turn, many will turn to rental properties instead for a place to live. And as more people rent, the more property owners will need to ensure their air conditioning and other HVAC systems are up to par with industry standards.
But on the flip side, rising interest rates can also have the inverse effect on home costs. When rates are too low, it creates a supply crunch in the market – increasing the cost of homes and disincentivizing homebuyers from making a purchase.
In the instance rates increase, sellers may sometimes lower the cost of their homes to entice buyers who would otherwise avoid making a purchase due to elevated rates. As a result, it could increase the overall likelihood that consumers will buy homes and invest in things such as HVAC systems to ensure comfort and bolster the property’s overall value.
Still, regardless of which way the market moves, commercial and residential properties will always rely on HVAC providers, indicating that FIX could be a solid play in either scenario.
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One Retail Stock that Could Continue Higher if Interest Rates Remain Low
Lower interest rates mean more spending. And with more spending comes more profits for retail companies.
Now, most of traditional retail had a rough decade in the 2010s… but not this company.
In the 2010s, this stock rose from just $59 all the way to $295 to end 2019. And in the past 2 years, it has nearly doubled…
That's because this retailer has figured out how to keep a relentless loyal customer base and manages to always be on the right side of public opinion, recently raising its minimum wage to $17/hour.
And if you're worried about this wage hike hurting this company's profitability, I have good news for you.
In their most recently quarterly earnings, revenue is up 17.41% year-over-year…
Net income is up 20.23%…
And Earnings Per Share is up 20.13%…
This is a very strong stock to own. If rates continue to go lower, you will want it in your portfolio before they drop.
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Costco Wholesale (COST) is an American multinational big-box retail chain store that offers everything from organic foods, televisions, and furniture.
It’s also one of the biggest players in the consumer staples sector, coming in as the fifth-largest retailer in the world.
And given its operations, the company typically benefits from lower interest rates. This is because lower interest rates often equate to lower mortgages and credit card debt – freeing up consumers’ expenses and increasing their overall spending power.
As this happens, consumers will spend more on items like fresh foods and alcohol. They’ll also be more inclined to buy items like video game consoles, entertainment systems, and other consumer electronics.
In turn, many will turn to companies like Costco, which offer a variety of items all in one place – both in person and online. This makes it an extremely convenient option for people as well.
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This Dividend Aristocrat Should Have an Even Higher Yield if Interest Rates Increase
Retirees NEED yield…
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And bonds might be even worse: all the risk of without the upside.
So retirees are in desperate search, now more than ever, of finding stocks that pay a good dividend.
And if interest rates go up (which would be bad news for anyone holding bonds)…
This stock could get a boost.
JPMorgan Chase & CO (JPM) is a multinational investment bank and financial services company located in New York City.
And it’s one of the best ways to capitalize on rising interest rates…
This is because banks, insurance companies, and brokerages have historically benefited from higher interest rates, as growing rates often coincide with an improving economy.
As the economy improves, it means prospective borrowers are more likely to not only receive loans, but also pay back the interest associated with them – reducing the overall risks for banks in the process.
This has clearly paid off for the company in recent months as well. In its latest financial report, JPMorgan said its third-quarter earnings per share were $3.74 compared to the anticipated $3.00. The investment bank’s revenue was $30.44 billion versus the estimated $29.79 billion.
As a result, the company released another $2.1 billion in loan-loss provisions – bolstering investors’ overall earnings payout in the process.
And now that interest rates are on the rise, these improvements could help build even greater momentum for the company – as it could ultimately lead to stronger profits in the months ahead.
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