The Federal Reserve raised its benchmark rate by a quarter of a percentage point on March 16. Chances are very good that this won’t be the last interest rate hike in 2022, seeing as how the relevant policymakers have stated that they expect it to be around 1.9 percent by the end of the year. This is important because inflation is high and becoming higher, meaning that some pushback is necessary. Of course, a raise in the benchmark rate can be expected to have a wide range of effects on a wide range of parties. To name an example, an interest rate hike tends to be seen as a bad thing for stocks because they hurt earnings. Fortunately, different stocks behave in different ways, so there are some that are said to be more capable of coping with a higher-interest environment.
1. American Express (AXP)
American Express has been doing quite well in spite of the hits to its core interests. It is a financial company, so it can expect to benefit from higher interest rates. Moreover, if travel and entertainment continue to recover, that could mean very good things for American Express in the near future.
2. Ares Capital Corporation (ARCC)
Ares Capital Corporation is a business development company. It is focused on helping out mid-sized companies so long as it believes that acquiring them, restructuring them, and otherwise assist them will prove to be worthwhile in the end. On top of this, Ares Capital Corporation is interesting in that it goes out of its way to become the first and only lender for its chosen companies. This is very powerful to say the least. After all, when it is the one and only lender, it can exercise much more control over a company’s affairs than if the latter had to answer to multiple lenders. Thanks to that, it is in a much stronger position than otherwise possible. Moreover, Ares Capital Corporation has a good track record, which should assauge people who are concerned about its ability to bet the right bets in this regard. Naturally, it also benefits from earning more interest on its loans to its chosen companies.
3. BlackRock (BLK)
BlackRock is the single biggest asset manager in the entire world. There is a lot of confidence in it. After all, it is involved in a wide range of investments in a wide range of countries. Furthermore, it has huge name recognition, which is a very powerful tool. On top of that, BlackRock offers technology services such as its investment as well as risk management platform. Combined, it has a lot going for it.
4. Cincinnati Financial (CINF)
Cincinnati Financial is an insurance company. That means that the very nature of its business model enables it to benefit from higher interest rates for the financial instruments used to hold its money. Besides that, Cincinnati Financial is very attractive because it is not just a dividend aristocrat but a dividend king with a record of more than six decades and counting. As records go, there aren’t a lot of companies that can compete with that, thus making it a natural choice for people to put their faith in.
5. Discover Financial Services (DFS)
Discover Financial Services tends to be best-known for its credit cards. As a result, it can expect higher revenues from the outstanding balances on its credit cards. However, it is important to note that it is involved in digital banking as well, meaning that it benefits from higher interest rates in other ways as well. After all, idle deposits can be used to make money. Furthermore, it has a fair number of consumer loans out there, which will now be earning more interest for it.
6. Equifax (EFX)
Equifax is one of the major credit bureaus. Higher interest rates mean that credit scores will become even more important, so it seems reasonable to speculate that it will see an increase in demand for its services. Besides that, Equifax has also been strengthening its position in its chosen markets through its acquisitions.
7. Extra Space Storage (EXR)
Extra Space Storage is a REIT that specializes in self-storage sites. That might sound rather concerning because of how sensitive REITs are to interest rates. However, Extra Space Storage is interesting because it has been increasing its long-term debt, as shown by how said figure went from $4.8 billion in 2019 to close to $5.6 billion in 2020 and then to $6.0 billion in 2021. In other words, it locked interest rates before the raise, meaning that it might be able to raise its storage prices without having its interest rates raised on it.
A lot of people have been talking about canceling student loans. However, there doesn’t seem to be much chance of that happening, so there isn’t much risk to the student loans industry. If people want to benefit from higher interest rates on student loans, well, suffice to say that Navient can be an excellent choice.
9. PacWest Bancorp (PACW)
Given its name, it should come as no surprise to learn that PacWest Bancorp is a regional bank that can be found in the state of California for the most part. It is pretty much exactly what one would expect from a regional bank, which is to say, it offers various financial products and services to interested parties. Thanks to that, PacWest Bancorp can expect to see improving numbers for a number of its revenue-earning operations, particularly as the U.S. economy is expected to continue improving. Having said that, what makes it special is that it seems to be run well, as shown by its excellent performance since the COVID-19 crisis.
10. Travelers (TRV)
Travelers is an insurance company. That isn’t the most exciting of businesses. However, Travelers is a huge player that offers a wide range of insurance with a wide range of coverages. As a result, those reliable revenues put it in a very solid position.