Fed Hike Still In The Cards? 4 Stocks That Stand To Gain

Amid the backdrop of an anemic non-farm payroll jobs report, the stuttering markets took a breather as Federal Reserve Chairwoman Janet Yellen reiterated that the gradual upward trajectory of the U.S. interest rates remains intact.

Yellen painted a largely upbeat picture of the U.S. economic outlook even as she recognized risks like inflation, slower demand and productivity, coupled with overseas risks. In fact, Yellen stressed that other gauges of the job market have been optimistic, but refrained from indicating any timetable for the next interest rates hike.

Prospects of a hike in next week’s Fed meeting were largely muted by last week’s dismal jobs report, which somewhat trampled over the recent optimistic data on housing, consumer spending and overall U.S. growth. However, market participants feel that a hike in July is still very much in the cards.

Banks and insurance companies would certainly be hoping for a hike in interest rates soon, as this largely makes up a major chunk of their earnings. While most industries see rising costs of debt as a direct consequence of higher interest rates, the banking industry, in particular, stands to reap higher profit margins.

With the expectation of an imminent rise in interest rates, it would be prudent for investors to invest in stocks from sectors that stand to benefit from higher rates. Therefore, it seems to be the perfect time to keep a tab on stocks that belong to industries like banking and insurance.

Moreover, this monetary policy indicates an improving economy, which means that credit quality will likely improve and aid the profitability of these companies.

We have zeroed in on four such potential stocks in the banking and insurance industries that sport a Zacks Rank #1 (Strong Buy), and have projected EPS growth this year in excess of 15%. In addition, these stocks also boast strong long-term growth expectations.

Also, these stocks have been seeing positive estimate revisions of late, which indicate bullish analyst interest and signals great prospects for the company.

4 Stocks to Ride the Hike

Erste Group Bank AG (OTC:EBKDY) offers banking and other financial services to retail as well as corporate clients and is headquartered in Vienna, Austria. Boasting a top Zacks Rank, the company is set to achieve EPS growth of 30.2% this year.

The stock has also been witnessing solid activity on the earnings estimate revision front as well. Analysts clearly envision a healthy future, as the Zacks Consensus Estimate for 2016 earnings has trended sharply up over the past couple of months, going from $1.46 to $1.64 per share.

First Bancorp (NYSE:FBP) operates as the bank holding company for FirstBank Puerto Rico, which offers financial products and services to retail, commercial, and institutional clients. This top ranked stock is set to attain EPS growth of a whopping 320% this year.

Over the past couple of months, analysts have become increasingly bullish on the company, leading to a spike in the Zacks Consensus Estimate for 2016, which now stands at 42 cents, up nearly 24% from 34 cents 60 days ago.

KCG Holdings, Inc. (NYSE:KCG) is an independent securities firm, which provides services that are designed to deal with trading needs across asset classes, product types, and time zones. Headquartered in New Jersey, this Zacks Rank #1 stock is expected to chart earnings growth of almost 18% this year.

Analysts have great expectations from the company this year and have been revising 2016 earnings estimates upward over the past couple of months. The company has seen its 2016 earnings estimate climb 36.6% in 60 days, from 82 cents to $1.12 per share.

National General Holdings Corp. (NASDAQ:NGHC) is a specialty personal lines insurance holding company, and is headquartered in New York. Boasting a top Zacks Rank, the company is projected to achieve EPS growth of 17.3% this year.

The stock has also been witnessing solid activity on the earnings estimate revision front as well. Analysts clearly envision healthy earnings momentum for the company as the Zacks Consensus Estimate for 2016 has trended sharply up over the past couple of months, from $1.86 to $1.92 per share.

The Bottom Line

Whether the Fed goes for a rate hike next week or next month, we strongly believe that these stocks will boost your portfolio returns on the back of robust growth potential and a strong Zacks Rank.