Speculation over the timing of the next rate hike continues to influence the market sentiments. Several issues including the Brexit-induced uncertainties, U.S. dollar appreciation and the upcoming Presidential election might cause further delay in the hike. However, the positive domestic economic factors such as a recovery in job market and increased household spending certainly increase the odds of a hike by the end of this year.
Hence, with the expectation of a rise in rate, investors can invest in stocks of sectors that typically benefit from higher interest rates. One such segment is the investment brokers.
Why Choose Investment Brokers?
Investment brokers earn interest income on un-invested cash in client accounts. Therefore, as the rates increase, they can invest this cash at higher rates, thereby leading to a rise in interest income.
A typical example of a brokerage firm that has been benefitting from the rate hike in Dec 2015 is The Charles Schwab Corp. (SCHW - Analyst Report) . Earlier, the low rate environment had forced the company to waive fees in order to maintain a positive return for clients. However, the rise in rates led to a decline in the company’s fee waivers. Hence, the possibility of another rate hike is anticipated to further benefit the company.
Currently, out of more than 260 industries on our radar, the Investment Brokerage space has a Zacks Industry Rank of 80 (Top 30%). Amid the unpredictable market conditions, it is important to consider the performance of an industry. This is because, more often than not, a rising tide will lift all boats in an industry, as there can be broad trends taking place in a segment that can boost securities across the board. In fact, studies have shown that an average stock in a strong industry is likely to outperform a great stock in a poor industry.
How to Select Favorable Investment Brokers?
With the help of the Zacks Stock Screener we have selected three investment broker stocks that have witnessed at least 20% positive price movement over the last three months and sport highly desirable Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LPL Financial Holdings Inc. (LPLA - Snapshot Report) is engaged in providing an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at financial institutions in the United States. It is based in Boston, Massachusetts. Further, it sports a Zacks Rank #1. Also, the shares of the company have gained nearly 39% over the past three months.
Moelis & Company (MC - Snapshot Report) , based in New York, is a global independent investment bank. The company provides innovative strategic advice and solutions to a diverse client base, including corporations, governments and financial sponsors. Shares of the company have climbed nearly 20% in the past three months and it holds a Zacks Rank #2.
Yintech Investment Holdings Ltd. (YIN - Snapshot Report) , based in Shanghai, China, is an online provider of spot commodity trading services which include account opening, investor education, market information, research, live discussion boards and real-time customer support. The company sports a Zacks Rank #1 and its shares have witnessed an upward trend of nearly 32% over the past three months.
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