Market Overview

Microsoft, Best Buy And Other Stocks For Rising Interest Rates

Among the stocks that analysts at Jefferies expect to flourish in a rising interest rate environment are retailers Amazon.com (NASDAQ: AMZN) and Best Buy (NYSE: BBY), as well as tech companies Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT).

The view on Wall Street is that it's not a matter of if interest rates with rise, but when. It will all come down to when the Federal Reserve finally begins to taper off its quantitative easing and the federal funds rate rises. The chief financial economist at Jefferies recently predicted that would happen in December, but others do not expect it until after the next round of wrangling over the federal budget and debt is concluded.

Note that some stocks in other sectors that Jefferies analysts also believe could benefit from rising interest rates include Capital One Financial, Fifth Third Bancorp and Ingersoll-Rand.

Amazon.com

Whether or not this e-commerce giant ends up delivering goods via drones, the company is likely to have a great holiday sales season. It sports a market capitalization of more than $176 billion. Its long-term earnings per share (EPS) growth forecast is about 36 percent, though the operating margin is near zero.

The consensus recommendation of the 42 analysts surveyed by Thomson/First Call is to buy shares. Eleven of them rate the stock at Strong Buy. The mean price target, or where analysts expect the share price to go, is about four percent higher than the current share price.

Shares have retreated a bit from a multiyear high reached earlier this week. The share price is up more than 43 percent from six months ago. In that time, the stock has easily outperformed the Nasdaq and the S&P 500.

See also: Cyber Monday Was Record-Setting, Amazon And eBay Reign Supreme

Best Buy

This big-box electronics retailer has been in turnaround mode this year, and it says tablets and video games are selling well this holiday season. Its market cap is more than $14 billion, but the return on equity is still in negative territory and the long-term EPS growth forecast is about seven percent.

Of the 23 analysts surveyed, 14 recommend buying shares, with five of them rating the stock at Strong Buy. They see some headroom for shares, as their mean price target is more than 12 percent higher than the current share price. That consensus target would be a new multiyear high.

The share price is more than 50 percent higher than six months ago, as well as up more than 235 percent year-over year. Over the past six months, this stock has outperformed both Amazon.com and Walmart, as well as the broader markets.

Intel

A forecast for a stabilizing of corporate PC demand prompted an analyst to upgrade shares of this Santa Clara, California-based maker of semiconductors. Its return on equity is almost 18 percent, though its long-term EPS growth forecast is only about five percent. The market cap is near $124 billion.

For the past three months, analysts have by and large recommended holding Intel shares. They see no room for shares to run, as their mean price target is about the same as the current share price. At least one analyst sees up to 22 percent potential upside over the next 12 months though.

The share price retreated more than six percent in late November, but it appears to be recovering this week while the broader markets are down. Over the past six months, Intel has underperformed competitors such as Qualcomm and Texas Instruments, as well as the broader markets.

Microsoft

Speculation continues that Ford's Alan Mulally will be the next Microsoft chief executive, despite denials by Mulally that he will make the move. The market cap of this technology giant is more than $318 billion. The return equity is more than 29 percent and the dividend yield is near 3.0 percent.

The consensus recommendation of the analysts polled is to hold Microsoft shares, and it has been for at least three months. The current share price is greater than their mean price target, meaning they see no upside at this time. Price targets are likely to change, depending on who ends up taking the reins of this company.

The share price is up less than nine percent in the past six months and reached a new multiyear high this week. The stock has outperformed the likes of IBM and Oracle in that time, though it has underperformed the Nasdaq.

See also: Alan Mulally Says He's Committed To Ford

At the time of this writing, the author had no position in the mentioned equities.

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