With inflation soaring, the Federal Reserve has started raising interest rates and may still have a lot to do.
Investors may therefore wonder which stocks are most affected by the rise in rates. Bank of America offers a list of S&P 500 stocks that fare worse when rates rise.
It is based on the sensitivity of relative stock performance to changes in the 10-year Treasury yield dating back to 1972, if any.
Here are the 10 worst performing stocks, by this metric, with the worst listed first.
· American hydraulic works (AWK) – Get the report from American Water Works Company, Inc., a water service. Bank of America rates the underperforming company.
· Take-Two interactive software (TWO) – Get the report from Take-Two Interactive Software, Inc., a video game publisher. Bank of America is evaluating the purchase of the company.
· Digital Real Estate Trust (DLR) – Get the report from Digital Realty Trust, Inc., a data center real estate investment trust. Bank of America is evaluating the purchase of the company.
· MarketAxess Holdings (MKTX) – Get the report from MarketAxess Holdings Inc., an electronic bond brokerage firm. Bank of America does not have a rating for the company.
· ResMed (MDM) – Get the ResMed Inc. report., a medical device company. Bank of America rates the company as neutral.
· General dollar (CEO) – Get the Dollar General Corporation report, a discount retailer. Bank of America rates the underperforming company.
· Real estate income (O) – Get the Realty Income Corporation report, a retail REIT. Bank of America is evaluating the purchase of the company.
· Lennar (LEN) – Get the Class A report from Lennar Corporation, a home builder. Bank of America rates the company as neutral.
· Chipotle Mexican Grill (GCM) – Get the Chipotle Mexican Grill, Inc. report., a restaurant chain. Bank of America has no rating on the company.
Scroll to continue
· Sales (VCR) – Get the report from Ventas, Inc., a healthcare REIT. Bank of America is evaluating the purchase of the company.
Morningstar on American Water Works…
Morningstar analyst Andrew Bischof likes the Camden, NJ company, giving it a narrow moat.
Admittedly, he thinks he is currently overvalued. It puts the fair value at $131, compared to a recent quote of $148.33.
“American Water Works has consistently grown profits at a double-digit rate, outpacing most regulated electric utilities, even as baseload retail water consumption has steadily declined due to efficiency savings,” said he wrote in a comment.
“Like many utilities, American Water Works is replacing and upgrading decades-old infrastructure in its system, resulting in organic growth.”
Additionally, “we expect the business to grow by acquiring small water systems, usually municipally owned. In the United States, more than 85% of the population is served by a municipal water utility, providing a long streak of acquisition growth opportunities. »
…and on Take-Two Interactive
Morningstar analyst Neil Macker attributes the New York-based company to a narrow gap and puts fair value at $200, more than half of the recent $123.61 quote.
“Take-Two is one of the largest third-party video game publishers and owns one of Grand Theft Auto’s best-known video game franchises,” he wrote in a comment.
“We believe the company is well positioned to not only capitalize on the success of GTA, but also to continue to diversify its revenue beyond its flagship franchise.”
Additionally, “we expect Take-Two to continue to benefit from strong console demand, the continued revitalization of PC games and growth in mobile games,” Macker said.
“Take-Two has capitalized on the shift within the industry towards a bifurcated market comprised of big AAA blockbuster titles on one side and smaller indie games on the other.
“Take-Two typically focuses on the high end, using both its capital to fund big-budget blockbusters and its marketing advantage over independents in terms of budget and established networks to support its titles.”
The author of this story owns shares of Realty Income and Ventas.