Investors seeking long-term stocks to buy and hold may certainly have trouble finding companies with attractive valuations in sectors with enough growth to consider. Various AI stocks are overpriced, and some of the more beaten-down areas of the market are ones many investors are avoiding for a reason. Thus, there’s a real paradox right now among high-performing and under-performing stocks.
That said, many of the companies in under-performing areas of the market are those with higher interest rate risk. Rising rates have affected companies to varying degrees. The three listed below are long-term stocks I think can be key beneficiaries of interest rate cuts in the near-future.
For those betting on a Fed that’s poised to cut, and may be more aggressive than the market thinks, here are three equities to consider right now.
Bank of America (BAC)
Bank of America (NYSE:BAC) has surprised many investors in this era of higher interest rates. The company’s net interest margins have been negatively affected by an inverted yield curve for some time. This fact, along with slowing capital markets activity, certainly should have negatively impacted the company in a big way.
The thing is, Bank of America’s size and dominance in the U.S. financial system is notable. When other smaller peers went down due to loan maturity and asset mismatches, Bank of America has been among the banks ready to scoop up assets at discounted prices.
Now, these rapid rate hikes have led to increased unrealized loan losses for Bank of America. These losses, primarily held in its held-to-maturity portfolio, are expected to recover fully by maturity. Initially concerning, the market has clearly responded positively to the bank’s outlook following the adjustments.
I think as interest rates come down, and pressures subside for banks in general, BAC stock could be among the outperformers in this space that’s worth pursuing. For those with an investing time horizon of a decade or longer, this could be a stock to pursue right now.
Apple (AAPL)
As one of the top long-term investment choices in the market, Apple (NASDAQ:AAPL) has seen incredible historical stock performance. This growth has led Apple to become the first company to hit a $3.5 trillion valuation, now the most valuable company in the world by market capitalization again.
The company’s strong cash reserves of $67 billion provide flexibility in the company’s strategic focus. Of late, Apple has devoted a large amount of resources to its AI-enabled product lineup and generative AI advancements. This has driven positive momentum for its stock price, as investors reconsider the company’s growth trajectory moving forward.
Notably, Apple’s robust financials include a 26.31% profit margin and 30.74% operating margin, showcasing effective management. AAPL stock has consistently exceeded analyst price target predictions, driven by strong revenue growth and the strategic launch of AI products exclusively with the iPhone 15 Pro. I think this will be a key product that enhances the company’s appeal as one of the top AI, long-term stocks on the market.
D.R. Horton (DHI)
America’s largest home builder by volume, D.R. Horton (NYSE:DHI) has shown robust revenue growth and possibility over the past decade. Based in Texas, its wide presence across the country will meet regional housing demands. Despite challenges like rising material costs and labor shortages, D.R. Horton has maintained relative resilience.
Over 45 years, the company successfully constructed and closed over 1 million homes across 33 states. It focused on quality homes for middle-income buyers, including single-family and multi-family rental properties, aligning with the growing investment real estate market. Additionally, it provided mortgage financing, title services and insurance agency services to homebuyers.
In FY24 Q2, revenue grew 14% to $9.11 billion, with net earnings up 24% to $1.1 billion ($3.52 per share). Home closings rose 15% to 22,548, and net sales orders increased 14% year-over-year. Strong housing demand in 2024 underscores DHI as a top pick in the home building sector. If interest rates drop, this demand could feasibly increase significantly, further bolstering the company’s outlook moving forward.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
