7 Investments for Attractive Profit and Yield in a Lower-Rate World
Investment experts discuss where investors can turn for profit and yield in a lower-rate regime.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Federal Reserve didn’t just cut interest rates at its September meeting. It cut BIG, opting for a 50-basis point move. Policymakers also signaled they’ll keep cutting rates in the rest of 2024 and well into 2025.
What investments could generate the most profit and yield in this falling-rate world? Find out from a trio of top MoneyShow expert contributors.
Mike Larson MoneyShow
This Chart Speaks Volumes! Are You Listening?
Charts can tell you a lot of things as a trader. The MoneyShow Chart of the Week below speaks VOLUMES...the only question is, are you listening?
Take a look at the image, which shows the three-month performance of five ETFs: One each that tracks Real Estate Investment Trusts (REITs), utilities, gold, smaller cap stocks, and declines in the US dollar...
You can see that just in the last 90 days, the Real Estate Select Sector SPDR Fund XLRE soared 17.3%. The Utilities Select Sector SPDR ETF XLU rallied 12.3%. The SPDR Gold Shares ETF GLD climbed 10.6%. The iShares Russell 2000 ETF IWM rose 9.1%. And the Invesco DB US Dollar Index Bearish Fund UDN gained 5.1%.
What’s the message here? That the Federal Reserve is going to cut interest rates early, often, and by a large amount!
When it does, that historically benefits bonds, gold, and rate-sensitive sectors of the stock market. It also tends to disproportionally favor small caps because those companies typically have higher debt loads and therefore benefit more from falling interest rates. On the flip side, lower rates hurt the value of the dollar.
I’ve been recommending ways to profit in Chart of the Week articles the last few months, including this one on bonds from June and this one on gold from August. I hope those worked out for you.
As for stocks and the ongoing market rotation to NEW winners? What’s not to like? This is healthy and it’s likely to continue. Play that trend for all it’s worth! After all, the Fed is finally on your side.
Carl Delfeld Cabot Wealth
A Nuclear Power Play in a Market Set to Prosper from Fed Cuts
The Federal Reserve voted to lower interest rates by half a percentage point, the first cut since 2020 and more than many expected. The overwhelming Fed board vote suggests more rate reductions are likely this year. Meanwhile, I continue to like the nuclear power play Centrus Energy Corp. LEU, notes Carl Delfeld, editor of Cabot Explorer.
This Fed move was clearly somewhat baked into markets. But this action will help support the market and boost interest rate-sensitive stocks such as real estate and utilities.
(Editor’s Note: Carl Delfeld is speaking at the Alternative Investing Virtual Expo, which runs Nov. 12-14, 2024. Click HERE to register)
Now we need to see how labor markets, and especially corporate profit numbers, develop. More important than Fed rate cuts to stock markets and the economy is whether the next Congress keeps driving up deficits and the national debt. If so, it is inevitable that rates will have to go up over time.
Centrus Energy Corp. (LEU)
Meanwhile, we are looking for new nuclear power ideas since nuclear plants generate electricity 24/7/365 – more than twice as much as solar and wind resources. The generating assets require fewer maintenance outages than coal or gas, making electricity even more reliable.
Nuclear energy is the only carbon-free emissions baseload energy source available today, offering efficient operations around the clock. One example, Georgia Power’s Plant Vogtle in Waynesboro, Georgia, is delivering carbon-free nuclear energy to more than 1 million homes.
As for LEU, its shares were steady this week as demand for processed uranium increases. Russia reportedly supplies around 14% of global uranium concentrates, 27% of conversion, and 39% of enrichment, while Kazakhstan produces 43% of the world’s uranium.
Four hundred and forty nuclear reactors across 32 countries provide about 10% of the world’s electricity. There are roughly 65 new nuclear reactors under construction around the world, with an additional 110 planned. Centrus is at the middle of this growth as a diversified supplier of nuclear fuel and services for nuclear power plants in the US and globally.
Recommended Action: Buy LEU.
Steve Reitmeister Zen Investor
A Housing Sector Play for the Lower-Rate Era
Housing is very sensitive to interest rates, as you might imagine. So, it makes a lot of sense to add a homebuilder like M/I Homes Inc. MHO as rates are set to head lower, advises Steve Reitmeister, editor of Zen Investor.
There were a lot of industry peers I could have selected instead. However, it is the impressiveness of their earnings momentum the past two years, when rates went higher, to help me appreciate how well the organization is run.
This translated to industry leading share price gains for MHO (orange line) – nearly 2X that of their peers, which shows up loud and clear in the performance chart below.
The issue with price action is that it’s a statement of the past. Looking forward, MHO is expected to earn $20.76 in earnings per share in 2025. That is up more than 15% since its last quarterly earnings report. Note that the company only beat by 11%...so it says that analysts see even more good times ahead for it.
Right now, the top analyst covering the firm is Buck Horne from Raymond James (Top 9%) who sees $210 as the rightful destination for shares. That does sound nice from current levels...but only equates to 10X next year’s earnings. That says to me upside is even more impressive, making it very attractive to build a position in shares right now below $170.
One of my favorite things about MHO is that it is underfollowed by Wall Street. Yet, with such impressive earnings momentum, and fundamentals in the top 5% of all stocks measured by the POWR Ratings...I suspect more analysts will initiate coverage of MHO with “Buy” ratings.
That fresh analyst coverage will most certainly be a catalyst for shares to break above $200...and keep running. Plain and simple, with interest rates set to drop, there are few stocks more attractive than MHO.
Recommended Action: Buy MHO.