Stocks slumped this morning following a whiplash-inducing reversal in the previous session. After trading deep in the red early yesterday, an unprecedented turnaround led the major indices to finish the trading day substantially higher. Despite yesterday’s gains, the major averages are on course for their third negative week in a row.
Recently, geopolitical tensions have taken center stage, driving market volatility and causing a knee-jerk reaction in some who choose to sell first and ask questions later. Investors would do well to stay focused on the bigger picture right now as the state of the economy will largely determine market stability over the long term.
With the Fed about to embark on a cycle of rate-hiking for the ages, we decided to take a look at some of the top performers from previous Fed hikes for clues on which stocks might do well. One name stood out.
Today we’ll take a look at a diversified energy company with a successful history during rate-hike cycles that speaks for itself. The stock comes equipped with an 83% Buy rating from the pros that cover it, plus a sizable dividend payout.
Headquartered in Arlington, VA, the AES Corporation (AES) is one of the world’s leading power companies, generating and distributing power in 15 countries. The company’s diverse portfolio of thermal and renewable generation facilities and distribution businesses spans across the Americas, Europe, the Middle East, and Asia. The stock has a history of outperforming the market following rate hikes.
The Fed’s most recent rate hike cycle began in 2015, during a time when inflation had fallen below the central bank’s 2% target, interest rates were increased 0.25% to 0.5%. In the six months following the hike, the S&P 500 saw a series of ups and downs but finished the period with a modest 0.3% gain. AES, however, managed to stack on almost 19% during the six months following the most recent rate hike.
Prior to that, Federal Reserve Chairman Ben Bernanke and his colleagues initiated an unprecedented two-year campaign in June 2004 to keep a lid on inflation following the recession of the early 2000s with a 0.25% hike to 1.25%. Six months after the initial rate hike, the S&P 500 had gained 6.2% while AES stacked on an impressive 37%.
Will history repeat this time around? There’s no telling, but the pros on Wall Street seem to see that potential. The stock garners an 83% Buy rating among the analysts offering recommendations. A median 12-month consensus price target of $30.50 represents a 26% upside from the last price.
Most recently, Goldman Sachs analyst Insoo Kin initiated coverage of the stock with a Buy rating and a $30 price target citing the company’s potential to take advantage of the material clean energy investment pipeline. The analyst predicts an approximately 8% EPS CAGR through 2025 that she sees as underappreciated at current valuations. If you need another reason to consider AES, a quick review of its dividend history should inspire. The company has steadily increased its dividend over the past ten years while maintaining a sustainable payout ratio of around 70% throughout. AES raised their dividend 5% last month to $0.158 per share or 2.55%.
Should you invest in AES right now?
Before you consider buying AES, you'll want to see this.
Investing legend, Keith Kohl just revealed his #1 stock for 2022...
And it's not AES.
Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.
Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.
Find that to be extraordinary?
Click here to watch his presentation, and decide for yourself...
But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
Click here to find out the name and ticker of Keith's #1 pick...
