Charles Schwab Corp (SCHW), American Express Company (AXP): Rising Rates Bode Well for These Firms

Technology?

While Microsoft Corporation (NASDAQ:MSFT) may not be a financial institution in the company description, its balance sheet may tell you otherwise. Shareholders are sitting on $5.2 billion in cash and $69.2 billion in short term investments. Add those balances together and you get $74.4 billion in capital positioned to benefit from rising interest rates. Assume the average interest rate in which Microsoft Corporation (NASDAQ:MSFT) receives rises by 2% in line with the market. That’s an additional $1.5 billion per year that the company could put right back into shareholder pockets. While the company may be a dinosaur, it did grow revenues by 18% last quarter–not bad considering the company is trading at only 11 times next year earnings. Analysts are expecting 10% earnings growth this year while holding an average price target of $35.42.

Wrap-Up

While the Street may be screaming that the sky is falling, rising interest rates do bode well for select firms. Many financial institutions are well-positioned to grow revenues in line with the rising rates as net interest margins expand. Look at broad market weakness as an opportunity to pick these companies up on a discount.

The article Rising Rates Bode Well for These Firms originally appeared on Fool.com and is written by Nathaniel Matherson.

Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool recommends American Express. The Motley Fool owns shares of Microsoft. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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