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Welcome to Episode #413 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, John Blank, Zacks Chief Equity Strategist, and the editor of the Large Cap Trader, and Tracey once again discuss the all-important question: is the US economy in a recession?
For over 8 years, Tracey and John have done podcasts on this very question, examining the employment data for clues. What does the data show in August 2024?
As the economy slows, Wall Street is convinced the Federal Reserve will cut rates at the Sep 2024 meeting.
If they do, what stocks will you want to be in?
What Stocks Should You Own When the Fed Starts Cutting Rates?
Builders FirstSource has seen slowing business in 2024 as single family and multi-family construction remains depressed. But when the Fed cuts rates, home buyers should return to the market as mortgage rates fall. Additionally, it will be cheaper for builders to borrow which should provide a catalyst for construction.
Earnings of Builders FirstSource are expected to fall 19.3% this year but rebound next year. Shares of Builders FirstSource are down 1.3% year-to-date and are cheap. It trades with a forward P/E of 13.6.
Should a construction play like Builders FirstSource be on your short list?
Home Depot recently reported its second quarter earnings and saw the consumer getting more conservative and pulling back on large ticket items. But as the Fed cuts rates, it will get get cheaper to finance that new kitchen or bathroom remodel.
Home Depot earnings were cut after the recent report. Analysts now see 0% earnings growth in fiscal 2024 compared to fiscal 2023, or $15.11. Shares of Home Depot are up just 3.7% in 2024. But it’s still pricey on a P/E basis, with a forward P/E of 23.5.
Is now the time to get into Home Depot on this weakness?
Equinix is a real estate investment trust (REIT) that owns data centers worldwide. REITs should be beneficiaries of Fed rate cuts as financing real estate purchases gets cheaper.
Shares of Equinix are up just 3.6% year-to-date. Earnings of Equinix are expected to be up 9.1% this year and another 8.2% next year. It’s trading at 24x. Equinix also pays a dividend, yielding 2%.
Is it the time to get into the data center trade through Equinix?
Winnebago makes RVs. Business soared during the pandemic as consumers took to the open road instead of staying at hotels. But when rates rose, so did financing of big ticket items like RVs. Will rate cuts help bring back RV buyers?
Shares of Winnebago have fallen 20.2% year-to-date. Earnings have also plunged, with fiscal 2024 earnings expected to decline 45.4%. It’s a Zacks Rank #5 (Strong Sell) as earnings estimates have been cut. But analysts expect Winnebago’s earnings to turn around next year, with a 34% jump.
Winnebago shares are cheap, but not dirt cheap. It trades at 13.4x.
J.M. Smucker is a defensive play in an inflationary environment, or a recession, as it makes peanut butter and coffee. Shares of J.M. Smucker are down 4.9% year-to-date.
It is expected to report fiscal Q1 2024 earnings on Aug 28,2024. Currently, analysts see fiscal 2024 earnings up just 1.2% but fiscal 2025 up 8.5%. J.M. Smucker is cheap. It trades at just 11.9x. J.M. Smucker is also a dividend aristocrat. It has raised its dividend 23 consecutive years. Smucker’s dividend is currently yielding 3.6%.
Should a defensive play like J.M. Smucker be on your short list?
What else do you need to know about a possible recession and rate cuts?
Tune into this week’s video podcast to find out.
[In full disclosure, Zacks Value Investor portfolio owns BLDR and Zacks Large Cap Trader portfolio owns EQIX.]
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Stocks to Buy When the Fed Cuts Rates
Welcome to Episode #413 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, John Blank, Zacks Chief Equity Strategist, and the editor of the Large Cap Trader, and Tracey once again discuss the all-important question: is the US economy in a recession?
For over 8 years, Tracey and John have done podcasts on this very question, examining the employment data for clues. What does the data show in August 2024?
As the economy slows, Wall Street is convinced the Federal Reserve will cut rates at the Sep 2024 meeting.
If they do, what stocks will you want to be in?
What Stocks Should You Own When the Fed Starts Cutting Rates?
1. Builders FirstSource, Inc. (BLDR - Free Report)
Builders FirstSource has seen slowing business in 2024 as single family and multi-family construction remains depressed. But when the Fed cuts rates, home buyers should return to the market as mortgage rates fall. Additionally, it will be cheaper for builders to borrow which should provide a catalyst for construction.
Earnings of Builders FirstSource are expected to fall 19.3% this year but rebound next year. Shares of Builders FirstSource are down 1.3% year-to-date and are cheap. It trades with a forward P/E of 13.6.
Should a construction play like Builders FirstSource be on your short list?
2. Home Depot, Inc. (HD - Free Report)
Home Depot recently reported its second quarter earnings and saw the consumer getting more conservative and pulling back on large ticket items. But as the Fed cuts rates, it will get get cheaper to finance that new kitchen or bathroom remodel.
Home Depot earnings were cut after the recent report. Analysts now see 0% earnings growth in fiscal 2024 compared to fiscal 2023, or $15.11. Shares of Home Depot are up just 3.7% in 2024. But it’s still pricey on a P/E basis, with a forward P/E of 23.5.
Is now the time to get into Home Depot on this weakness?
3. Equinix, Inc. (EQIX - Free Report)
Equinix is a real estate investment trust (REIT) that owns data centers worldwide. REITs should be beneficiaries of Fed rate cuts as financing real estate purchases gets cheaper.
Shares of Equinix are up just 3.6% year-to-date. Earnings of Equinix are expected to be up 9.1% this year and another 8.2% next year. It’s trading at 24x. Equinix also pays a dividend, yielding 2%.
Is it the time to get into the data center trade through Equinix?
4. Winnebago Industries, Inc. (WGO - Free Report)
Winnebago makes RVs. Business soared during the pandemic as consumers took to the open road instead of staying at hotels. But when rates rose, so did financing of big ticket items like RVs. Will rate cuts help bring back RV buyers?
Shares of Winnebago have fallen 20.2% year-to-date. Earnings have also plunged, with fiscal 2024 earnings expected to decline 45.4%. It’s a Zacks Rank #5 (Strong Sell) as earnings estimates have been cut. But analysts expect Winnebago’s earnings to turn around next year, with a 34% jump.
Winnebago shares are cheap, but not dirt cheap. It trades at 13.4x.
Should Winnebago be on your short list?
5. J.M. Smucker Co. (SJM - Free Report)
J.M. Smucker is a defensive play in an inflationary environment, or a recession, as it makes peanut butter and coffee. Shares of J.M. Smucker are down 4.9% year-to-date.
It is expected to report fiscal Q1 2024 earnings on Aug 28,2024. Currently, analysts see fiscal 2024 earnings up just 1.2% but fiscal 2025 up 8.5%. J.M. Smucker is cheap. It trades at just 11.9x. J.M. Smucker is also a dividend aristocrat. It has raised its dividend 23 consecutive years. Smucker’s dividend is currently yielding 3.6%.
Should a defensive play like J.M. Smucker be on your short list?
What else do you need to know about a possible recession and rate cuts?
Tune into this week’s video podcast to find out.
[In full disclosure, Zacks Value Investor portfolio owns BLDR and Zacks Large Cap Trader portfolio owns EQIX.]