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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