With inflation hovering at a generation high, some stocks stand out for their ability to help investors hedge against the impact of higher interest rates better than others. That’s the message from Trivariate Research, which believes that with inflation stubbornly above the Federal Reserve’s 2% annual target, investors are increasingly worried about the obstacles companies face due to rising borrowing costs and the risk of continuing to raise prices. necessity. Adam Parker, founder of Trivariate Research and former chief U.S. equity strategist at Morgan Stanley, wrote in a recent report: “In the wake of the COVID-19 pandemic, which has seen historically low interest rates in the U.S., the dynamics have changed.” “From The beginning of late 2021 saw a huge inverse correlation between sentiments about interest rates and the valuations of growth companies.” But despite higher price gains, interest rates and inflation risks have impacted the stock market over time. Getting smaller and smaller. While a basket of high-quality growth stocks used to be negatively correlated with inflation, meaning their share prices would suffer as inflation rose, Trivariate says that relationship has since changed. “Today, the high-quality growth basket has zero correlation with the inflation basket,” the firm said. In the same report, Trivariate Research shared a basket of high-quality companies in the technology sector that has close to zero correlation with the inflation basket. . Here are some stocks on the list: Keysight Technologies is one of those companies. The electronic equipment maker’s shares are down nearly 10% this year. Even so, Morgan Stanley, which is overweight the stock, ranked Keysight as a “top pick” earlier this month. Morgan Stanley analyst Meta Marshall wrote: “We believe that after last quarter’s earnings cut of about 12%, expectations for fiscal 2024 have bottomed out, with valuations (about 20x fiscal 2025) relative to risk exposure. ) reasonable. “Stable orders coupled with a view on recovery timelines could act as a catalyst. Trivariate’s basket also includes Procore Technologies, which writes management software for the construction industry. The stock is relatively unchanged so far this year. In April, J.P. Morgan named Procore one of its top picks, citing its reputation as a construction-focused company. Position as a Leading Provider of Software-as-a-Service (SaaS) Cloud Platforms “Procore faces a global annual build volume of approximately $11 trillion. Multiply that number by the share of spending on IT solutions (1.7%) and calculate that for applications. Software’s IT budget segment (7.3%) The bank writes that the global addressable market totals about $13 billion. Cloud computing stock Nutanix has soared 52% this year, but Raymond James believes there is room for further gains in the future. “We have a better sense of Nutanix’s opportunity to gain share from VMware following its acquisition by Broadcom,” analyst Simon Leopold wrote. “Broadcom’s efforts to increase VMware growth and performance have resulted in bundling and higher-than-expected price increases, which will cause some customers to seek alternatives to Nutanix in some cases.” ” —CNBC’s Michael Bloom contributed to this report.
