Consistent returns may seem hard to find amid a topsy-turvy stock market and soaring Treasury yields. Yet there are certain names that have proven to benefit in this environment. Stocks have been volatile in recent weeks, as investors anticipate the Federal Reserve’s next move. The latest hot inflation report dashed investors’ hopes of a more accommodative Fed, which has already raised rates four times this year. The central bank, which kicked off its September meeting on Tuesday, is expected to announce a 0.75 percentage point rate hike on Wednesday. Meanwhile, bond yields have spiked, with the 2-year Treasury hitting a fresh 15-year high and the 10-year trading near levels not seen since 2011. To find the best and consistent S & P 500 performers in an environment like this, CNBC Pro looked at the 10 biggest monthly moves in the 10-year Treasury yield over the last five years. These stocks had the biggest median percent gain during those 10 months of rate spikes, according to FactSet’s data. They were also consistent, not losing more than 5% during any of these months of higher rates. Energy stocks were excluded due to their unique and outsized move during the past 12 months. What follows are the top 10 under-the-radar stocks poised to outperform as the Fed continues to hike interest rates. Topping the list are agriculture company Archer-Daniels-Midland and health-care services provider McKesson Corporation, both of which have seen a median move of 5.4% during the 10 months of rate spikes on the 10-year Treasury. Archer-Daniels-Midland, up 27% year to date, posted quarterly per-share earnings and revenue in late July that beat Wall Street’s estimates. McKesson Corporation is up nearly 40% in 2022. On Monday, the company announced it would acquire private pharma tech firm Rx Savings Solutions for $875 million. A handful of financial stocks also made the cut. FLEETCOR Technologies saw a median move of 4.4% and shares of Hartford Financial Services had a median move of 4.3%. Commercial lines insurer WR Berkley had a 2.6% median move during the 10 months of rate increases. Meanwhile, real estate investment trust Host Hotels & Resorts saw a 3.1% median move. FLEETCOR and Hartford Financial are both down so far this year, about 11% and 6%, respectively. WR Berkley has gained 20% year to date, while Host Hotels & Resorts is up about 0.5%. Higher interest rates are generally a positive development for insurers and banks. Insurance companies benefit from rising bond portfolio yields as they snap up newer issues. Meanwhile, banks get a boost to their net interest income — that is, the difference between what the institutions earn on interest-bearing assets and the cost of paying interest to customers on deposits. Host Hotels & Resorts was recently added to Goldman Sachs’ ROE Growth basket, which contains 50 stocks with the highest consensus expected ROE growth during the next 12 months. ROE is a widely used metric to gauge the profitability of a company and is the measure of a company’s net income divided by its shareholders’ equity.
