Investor position ahead of potential rate hike

Broader US market averages fell on Friday, with the S&P 500 down nearly 3% in the past week. Consumer Staples led the way lower, while the Energy sector was a beacon.

Traders sought to uncover stock, bond and commodity prices as news of the deteriorating situation in Ukraine met hopes that the Federal Reserve would raise short-term interest rates on March 16.

In economic action, it was reported on Thursday that U.S. core consumer prices (CPI) rose 6.4% in February. Short-term inflation expectations also jumped in the March Univ preliminary report. from the Michigan Consumer Sentiment Survey.

The week ahead

Dollar General (DG) and FedEx (FDX) will highlight a relatively calm earnings schedule next week.

The Fed’s interest rate decision on Wednesday will be the main focus. An increase of 25 basis points is expected. Announcement of new quarterly expectations and the number of additional hikes we can expect in 2022 will be essential.

Elsewhere, producer prices (PPI) for February will be announced on Tuesday. US retail sales are due the next day ahead of the FOMC announcement.

Following the rapid recovery in equities in recent quarters from pandemic lows, we believe investment gains will be harder to come by in 2022 given the slowing growth outlook and the outlook for interest rates. higher interest.

Therefore, deciding what and when to buy can be difficult for any investor. However, the fact remains that attractive investments are available if you are willing to dig a little deeper. One such consumer name deserves a closer look and is our stock of the week.

Action of the week: BJ’s Wholesale (bj)

The company is a warehouse retailer, with 225 locations primarily in the eastern United States. The stock gained nearly 7% last week and we believe this outperformance can continue into the first half of 2022. Here’s why:

Although all consumer-facing names face inflationary pressures, BJ’s has a competitive edge. It offers buyers a value perspective to buy in bulk.

This was evident in the company’s most recent quarterly results, which beat earnings expectations earlier this month.

BJ’s earned $0.80 per share in the fourth quarter of 2021 as revenue rose 10% from a year ago to $4.36 billion. Same-store sales increased 8.8%, driven by gasoline demand.

At current levels, the stock is valued at 18.5 times expected earnings over the next four quarters, which is a discount to the broader market.

Wall Street also sees value in the retailer. Deutsche Bank upgraded the shares last month from Hold to Buy.

In the meantime, the title displays a Smart Score of 8/10 on TipRanks. This proprietary score uses Big Data to rank stocks based on 8 key factors that have historically been a precursor to future outperformance.

In addition to the positives already mentioned, the Smart Score indicates that stocks have seen improved sentiment among individual investors and financial bloggers.

For your information: this is just one of the 20 stocks selected for the Smart Investor portfolio. This is where we share more detailed information about our weekly title picks.

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