5 Stocks to Buy for Interest Rate Hikes

1. Bank of America Corporation (NYSE:BAC)

Number of Hedge Fund Holders: 99

Bank of America Corporation (NYSE:BAC) is an American multinational investment bank and financial services holding company. For Q3 2022, BofA guided for net interest income to be at least $900 million-$1 billion higher as compared to Q2. It remains one of the best stocks to buy for interest rate hikes. 

On September 12, Deutsche Bank analyst Matt O’Connor assigned a Buy rating to Bank of America Corporation (NYSE:BAC) stock but lowered the price target on the shares to $45 from $51. Although banks have underperformed this year due to recession fears, the analyst said there is upside in the longer-term for the group if the US avoids a significant economic downturn. 

According to the second quarter database of Insider Monkey, Bank of America Corporation (NYSE:BAC) was part of 99 hedge fund portfolios, with combined stakes worth approximately $36 billion. Harris Associates is a notable stakeholder of the company, with 49.4 million shares valued at $1.5 billion. 

Miller Value Partners mentioned Bank of America Corporation (NYSE:BAC) in its Q1 2022 investor letter. Here is what the firm had to say:

“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.

A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).

We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”

You can also take a look at 10 Monthly Dividend Stocks with Highest Yields and 10 Penny Stocks with High Growth Potential.

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