While inflation shows signs of receding, interest rates have yet to reach their peak. U.S. inflation rates remain above the Federal Reserve’s 2% target, with Fed Chair Jerome Powell emphasizing that addressing inflation is the central bank’s primary goal in 2023. The Federal Reserve just announced another rate hike, bringing the federal funds rate to 5.25. What should investors do? Our team has identified seven stocks that could turn these interest rates to your advantage.
Marathon Petroleum Corp. (MPC) –
Marathon Petroleum is an independent petroleum products refiner and marketer with a focus on the U.S. Midwest, West Coast, and Gulf Coast regions. Among the top stocks with the highest sensitivity to 10-year U.S. Treasury yields, analysts predict continued tailwinds for refiners in 2023 due to wide crack spreads. Marathon is a top refiner stock pick with a “buy” rating and a $165 price target.
ON Semiconductor Corp. (ON) –
ON Semiconductor designs and manufactures power and data management semiconductors used in electronics, automobiles, and appliances. Despite the semiconductor industry’s cyclical downturn, ON has performed well, with analysts seeing the company as a top electric vehicle supplier. Bank of America has a “buy” rating and a $100 price target for ON.
Targa Resources Corp. (TRGP)
Targa Resources is a U.S. midstream logistics company specializing in onshore natural gas and natural gas liquids (NGLs). Targa’s impressive Permian Basin volumes and higher-than-expected 2023 guidance make it an attractive investment. Bank of America has a “buy” rating and a $94 price target for TRGP.
United Rentals Inc. (URI)
United Rentals is the world’s largest equipment rental company. With robust 2023 guidance and the introduction of its first-ever dividend, United Rentals has a positive outlook for manufacturing, infrastructure, and construction demand. Bank of America has a “buy” rating and a $450 price target for URI.
Phillips 66 (PSX)
Phillips 66 is one of the largest U.S. independent petroleum products refiners and marketers. With a 4% dividend yield, it boasts the highest on this list. The company’s bullish outlook for higher crack spreads in 2023 and 2024 makes it a strong pick, and Bank of America has a “buy” rating and a $137 price target for PSX.
SBA Communications Corp. (SBAC)
SBA Communications is a specialized real estate investment trust (REIT) that operates a global wireless communications tower network. Despite a 5% year-to-date dip, SBA reported 13% site-leasing revenue growth in the fourth quarter, with a “buy” rating and a $325 price target from Bank of America.
General Motors Co. (GM)
General Motors is the largest U.S. car and truck manufacturer. With better-than-expected recent performance and a focus on transitioning to electric vehicles, GM is investing heavily in EV and autonomous vehicle technology. Bank of America has a “buy” rating and a $70 price target for GM.Marathon Petroleum Corp. (MPC) – Implied upside: 30.5%