Essentially, investors may assume that the equities space will favor a risk-on profile. Previously, the Fed’s main concern was to navigate the devastation of the Covid-19 crisis. The economy managed to escape the worst of the pandemic. However, the various accommodative monetary and fiscal policies led to blistering inflation. In response, the Fed hiked borrowing costs, which subsequently led to a challenging business environment.
Now, policymakers see a reasonable outlook for a so-called soft landing. That should bode well for entities that could benefit from reduced financing overhangs. With that, below are stocks to buy amid potential interest rate cuts.
Newmont (NEM)
If the Fed goes ahead with interest rate cuts, investors will want to keep precious metals miner Newmont (NYSE:NEM) on their list of stocks to buy. If you’ve been paying attention, the spot price in gold has been steadily marching higher. I don’t think that’s a coincidence. Reduced borrowing costs imply devaluation of the dollar. I don’t mean that in an apocalyptic sense. Rather, greenbacks today will buy more than greenbacks tomorrow.
Anyways, a controlled inflationary dynamic is what economists want so NEM should be a key target for upside. What makes Newmont particularly attractive is that it may be done going through its disappointing volatile phase. Back in the third quarter of last year, the company suffered a sizable miss on earnings. Subsequently, in the next three quarters, the average earnings surprise stood at nearly 26%.
Now, investors will be paying a bit more of a premium for NEM stock, which trades hands at 3.25X sales. That’s higher than the prior year’s average multiple of 2.81X. Still, I don’t consider this to be a dealbreaker because of the projected growth.
Analysts see sales of $17.99 billion by year’s end. That’s up 52.3% from the prior year’s tally of $11.81 billion. Thus, it’s one of the risk-on stocks to buy.
Caterpillar (CAT)
As one of the giants in the manufacturing and mining equipment industry, Caterpillar (NYSE:CAT) arguably makes for an excellent idea for stocks to buy under interest rate cuts. For one thing, mining projects may accelerate due to the aforementioned devaluation of the dollar. Gold mines in particular may draw big interest, which benefits CAT stock. Also, other industrial growth could see rising demand for Caterpillar products.
That may especially pan out under a second Trump term. If I’m being completely honest, any president will talk a good game about rebuilding America and what not. I’m not privy to the specifics but whatever happens should bode well for Caterpillar. Financially, the company has been on a win streak, generating an earnings surprise of 13.85% in the past four quarters.
Currently, CAT stock trades hands at 2.59X. That’s not a terrible premium compared to the prior year’s average multiple of 2.29X. Now, the consensus view among analysts calls for sales of $66.09 billion, which is down from last year’s $67.06 billion. However, the high-side estimate calls for $68.25 billion.
Under a dovish environment, CAT will likely be a beneficiary. Therefore, it’s one of the stocks to buy.
JPMorgan Chase (JPM)
Admittedly, JPMorgan Chase (NYSE:JPM) makes for a tricky narrative among stocks to buy for interest rate cuts. Obviously, it’s one of the stalwarts in the big banking ecosystem. Lower borrowing costs translates to lower profitability for its financial products. At the same time, the banking institution may see greater business volume from the rate cuts. It depends on how you view the economy.
For those who believe the environment is a glass half full, JPM stock could be very interesting. Sure, the company’s recent earnings history has left some investors jittery. Between Q3 2023 and Q1 2024, the average earnings per share was $3.86, implying an earnings surprise of under 3%. However, in the most recent Q2, the big beat yielded a surprise of 46.1%.
JPM stock got its mojo back. It’s pricier now, trading hands at 3.86X sales. In the prior year, the metric averaged 3.26X. However, analysts see significant business expansion ahead. Now, they’re calling for fiscal 2024 sales to hit $176.1 billion, up 17.7% from last year.
Lower borrowing costs could make that happen. It’s one of the stocks to buy.
Exxon Mobil (XOM)
Investors who are still on the sidelines may want to wait until big oil giant Exxon Mobil (NYSE:XOM) releases its Q2 earnings on Aug. 2. Theoretically, the hydrocarbon stalwart should benefit from increased economic activity that could stem from interest rate cuts. Further, most people drive combustion-based vehicles. Therefore, Exxon’s downstream business unit should see boosted demand under an inflationary environment.
Still, there are some uncertainties involved. Since Q1, over the past four quarters, the oil giant’s average EPS landed at $2.19. This figure missed the collective consensus view of $2.20, yielding a negative earnings surprise of 0.48%. Noticeable misses in all but Q4 sealed Exxon’s fate. However, Q2 might provide a different story, making it an intriguing idea for stocks to buy.
Right now, shares trade hands at 1.44X sales. That’s a modest premium to the prior year’s average print of 1.24X. The problem is that at the moment, the consensus view for 2024 sales calls for $353.57 billion. That’s up only 2.6% from last year.
However, the high-side estimate is aiming for $444.62 billion. If you want to speculate, XOM is one of the stocks to buy.
Enphase Energy (ENPH)
Back during the aftermath of the Covid-19 crisis, solar energy solutions specialist Enphase Energy (NASDAQ:ENPH) saw both triumph and turmoil. From 2020 to 2021, ENPH stock skyrocketed, in part due to the interest in the equities space. However, the company gave back plenty of the rewards last year. Unfortunately, high interest rates crimped demand, which suffocated the core business.
However, with interest rate cuts on the horizon, Enphase is legitimately one of the speculative stocks to buy. Right now, it doesn’t seem like it because the news cycle hasn’t yet impacted the business. In the past year since Q2, the company’s average EPS landed at 59 cents. Unfortunately, this figure missed the average consensus view of 61 cents, yielding a negative earnings surprise of 5.38%.
Another tricky element about ENPH stock is the valuation. At 10.65X sales, it’s not what you would call cheap. Also, in the prior year, the average metric sat at 7.57X. Again, not cheap.
Following a big sales drop projected in fiscal 2024, analysts anticipate a recovery in 2025. The top line could see $2.03 billion, with the high-side estimate calling for $2.33 billion. Last year, Enphase generated revenue of $2.29 billion. It’s risky but a dovish policy could get things moving again.
LendingTree (TREE)
An online lending marketplace, LendingTree (NASDAQ:TREE) would rank as a natural candidate for stocks to buy. Under an environment of interest rate cuts, consumers will be more eager to consider borrowing money. That spells good news for mortgage providers and financial institutions specializing in personal loans, credit cards and other products. For LendingTree, a competitive fervor could boost the brand.
So far, the company is delivering the goods. In the past year since Q2, LendingTree’s average EPS clocked in at 53 cents. This easily beat the average consensus view of 31 cents, yielding an earnings surprise of 195.23%. Should the Fed implement a dovish monetary policy, investors may reasonably expect expansion in the business.
Now, it must be said that TREE stock is trading at a higher premium than it did last year at 1.04X sales. In the prior year, the metric averaged only 0.55X. That might seem problematic. However, context matters.
For fiscal 2024, analysts are looking at sales of $853.29 million. That’s up 26.9% from last year. Also, 2025 sales could soar to $967.35 million, making it one of the stocks to buy.
Coinbase (COIN)
The cryptocurrency market is a volatile and some might say a controversial one. For those who prefer to stay in the traditional capital markets, they have Coinbase (NASDAQ:COIN). By investing in one of the most popular platforms for virtual currencies, it’s one of the indirect ways that market participants can gain “legitimate” exposure to the blockchain.
To be fair, the crypto market has been all over the map. Some of it comes down to a sector-focused conference that former president Donald Trump attended. Apparently, the rambling words of “The Donald” didn’t persuade many crypto advocates. Nevertheless, Coinbase itself has enjoyed a strong year financially. In the past four quarters, it generated a whopping average EPS of $1.25, beating the consensus view of a loss of 4 cents.
Now, the issue with COIN stock is valuation, trading hands at 14.89X sales. In the past year, this metric landed at 10.61X. Still, looking out to the end of this year, analysts project revenue to hit $5.94 billion. If so, that would be up 91.1% from the prior year’s tally of $3.11 billion.
It may just come down to borrowing costs. Keep an eye on COIN as one of the possible stocks to buy.
On the date of publication, Josh Enomoto did not have (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.