Now that the Federal Reserve has indicated that it will likely start raising interest rates in March, which stocks should you consider buying, and which should you avoid?
Jefferies created a list of 10 stocks for each side of that equation -- stocks that may benefit from rising rates and stocks that may suffer from rising rates, CNBC reports.
For the list of stocks that may benefit, Jefferies chose non-financial companies with a market capitalization greater than $10 billion that have a strong positive correlation with the 10-year Treasury yield and real yield since 2010.
The roster includes American Airlines (AAL), Caterpillar (CAT), Deere (DE), ConocoPhillips (COP), FedEx (FDX), General Electric (GE), General Motors (GM), Honeywell (HON), Marathon Petroleum (MPC), and Pioneer Natural Resources (PXD).
For the list of stocks that may suffer, Jefferies used the same criteria, but with the opposite correlation from the positive list. It chose non-financial companies with a market capitalization greater than $10 billion that have a strong negative correlation with the U.S. 10-year bond yield and real yield since 2010.
The roster includes American Tower (AMT), Amgen (AMGN), Chipotle Mexican Grill (CMG), Clorox (CLX), Colgate-Palmolive (CL), Eli Lilly (LLY), General Mills (GIS), Hershey (HSY), PepsiCo (PEP) and Zscaler (ZS).
As for American Airlines, Morningstar analyst Burkett Huey puts fair value at $19.50, compared to its recent quote of $15.81.
“No-moat-rated American Airlines restored its network to a greater extent than peers during the fourth quarter, but increased fixed-cost utilization has not brought operating margins above zero just yet,” he wrote last week.
