The specter of rising interest rates is one of the main issues that keeps buffeting the stock market and causing some big waves of volatility. While the bank stocks are beneficiaries of rising rates, technology stocks are not, and they have been hammered off and on recently as the 10-year Treasury yield has climbed to its highest level in over a year. For perspective, note that the bond closed Friday at a 1.62% yield, but during the beginning of the financial crisis in 2007 the yield was 5.26%.
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BofA Securities analysts recently highlighted a screen of S&P 500 stocks with the highest positive interest rate betas to changes in the 10-year Treasury yield over the past 10 years. We screened that list looking for stocks that are rated Buy at BofA Securities and found five that look like very solid ideas going forward. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

CBRE

One would think real estate would be hurt by rising rates, but this company is an exception. CBRE Group Inc. (NYSE: CBRE) operates as a commercial real estate services and investment company worldwide.

Its Advisory Services segment provides strategic advice and execution to owners, investors and occupiers of real estate in connection with leasing; property sales and mortgage services under the CBRE Capital Markets brand; property and project management services, including construction management, marketing, building engineering, accounting and financial services for owners of and investors in office, industrial and retail properties; and valuation services that include market value appraisals, litigation support, discounted cash flow analyses and feasibility studies, as well as consulting services, such as property condition reports, hotel advisory and environmental consulting.

The Global Workplace Solutions segment offers facilities management, project management and transaction management services. The Real Estate Investments segment provides investment management services under the CBRE Global Investors brand to pension funds, insurance companies, sovereign wealth funds, foundations, endowments and other institutional investors, and it offers development services under the Trammell Crow brand, primarily to users of and investors in commercial real estate.

The BofA Securities price target for CBRE stock is $90 a share. That is higher than the Wall Street consensus target of $83.33 and Friday’s closing price of $79.08 per share.

This is one of the larger companies in the data center arena. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.
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The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.

Investors in Equinix stock receive a 1.22% distribution. The towering $865 BofA Securities target price compares with an $841.42 consensus price objective. The shares closed most recently at $668.

Freeport-McMoRan

This remains a compelling value at current trading levels, and copper pricing has been on fire. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and molybdenum producer, and the eighth largest gold producer. Its key operating and development assets are in Indonesia, North and South America and Africa.

Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects and would clearly benefit from stronger demand and higher prices for industrial commodities.

The BofA Securities has a price target of $40, and the posted consensus target is just $34.94. Freeport-McMoRan stock closed at $17.77 a share on Friday.

This venerable car company could benefit from an improving economy and the return to work, and also it is on the firm’s US 1 list of top stocks. General Motors Co. (NYSE: GM) is the world’s largest automaker, with annual volume of almost 9 million units. It now relies on only four core brands in its key North American segment (Chevrolet, GMC, Buick and Cadillac).
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GM also sells cars, trucks and crossovers to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. In addition, it offers connected safety, security and mobility solutions, as well as information technology services. The company, through its General Motors Financial Company subsidiary, provides automotive financing services.

The analysts are positive on the auto giant and noted this recently:

GM announced that Cruise has entered into a strategic agreement with Microsoft to advance commercialization of its autonomous vehicle fleet. Microsoft’s value-add to Cruise/GM partnership and AV development/deployment will be its cloud/edge computing platform Azure. Microsoft will contribute to a $2 billion equity investment in Cruise, bringing post-money valuation to $30 billion

The BofA Securities team has set its price target on the auto manufacturer at $72. The consensus target is lower at $63.81, and General Motors stock was last seen on Friday trading at $59.96 a share.

United Rentals

This stock has rallied smartly but still has solid upside potential, and it is also on the US 1 list. United Rentals Inc. (NYSE: URI) is the largest equipment rental company in the world. It has an integrated network of 897 rental locations in 49 states and 10 Canadian provinces. With approximately 12,700 employees, the company serves construction and industrial customers, utilities, municipalities, homeowners and others.

United Rentals offers for rent approximately 3,300 classes of equipment with a total original cost of $8.7 billion. Trading at 12.2 times trailing 12-month earnings, it remains very cheap.

The BofA Securities price target is $350. The posted consensus target was last seen at $293.13. United Rentals stock ended trading on Friday at $317.86 per share.

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Needless to say, a sharp spike in interest rates would be dangerous to the overall stock market, and these stocks likely would also be affected if that were the case. However, with the Federal Reserve content to continue a very loose monetary policy until employment drastically picks up, it is unlikely it will raise rates anytime soon.

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