Kiplinger

10 Stock Picks That Should Love Lower Interest Rates

Patrick R. McDowell, CFP®, AIF® was quoted in a Kiplinger article by James Brumley discussing stocks picks that should love lower interest rates.

It’s official. The United States’ base interest rate, the Fed funds rate, has fallen for the first time in over a decade. The last time the Federal Reserve ratcheted interest rates lower was in 2008, when the subprime mortgage meltdown still was in full swing. The nation’s central bank was willing to try almost anything to kickstart the recovery that finally took shape in 2009…

Interest-rate cuts have a slew of effects that in turn help bolster some companies while chipping away at others. With a new lower-rate paradigm starting to gel, here are 10 stock picks that are perfectly positioned to get the most out of this environment of cheaper money.

Charter Communications could be among unexpectedly rewarding stock picks thanks to the effect that lower interest rates would have, too.

Patrick McDowell, CFP, portfolio manager with Florida-based Arbor Wealth Management, says, “The biggest beneficiaries of low interest rates are profitable, growing companies who can target their debt levels relative to their income and use that debt to fuel buyback programs.”

Arbor Wealth Management has tapped into the idea, with real money. McDowell continues, “The best example of this would be Charter Communications, which is one of our firm’s largest holdings. They recently issued debt at just above 5% which they will partially use to fund buybacks. That’s pretty accretive to equity owners over time.

“If rates stay lower for longer, which we think they will, companies executing this strategy will be major beneficiaries.”