“Will they raise or won’t they raise?” That’s the question investors are asking themselves this week, as they try to determine what stocks to buy before the Federal Reserve meeting this week.
Before last month — when China went bonkers and the U.S. stock market suffered its first correction since 2011 — the consensus view was that the Fed would begin to raise rates at the September meeting. But the newfound market volatility, in tandem with a strong U.S. dollar and tepid inflation, make the Fed’s decision anything but obvious.
The Federal Open Market Committee meeting will take place between Sep. 16-17, meaning it will essentially captivate Wall Street’s attention for the next two days.
What’s an individual investor to do in the wake of all this confusion? One attractive strategy is simply to buy stocks that don’t care what the Fed does about interest rates over the next few days … because it doesn’t really matter to their business.
Stocks to Buy: Old Dominion Freight Line (ODFL)
Market Capitalization: $5.7 billion
One sector you wouldn’t want to invest in if you wanted to shield yourself from big moves after this week’s rate decision? Financials.
It’s generally great for banks and insurance companies when rates rise, as they can earn greater yields on their gobs of capital. Bank of America (BAC), JPMorgan (JPM) and Citigroup (C) will be anxiously listening to every word coming out of Fed Chair Janet Yellen’s mouth for the next two days.
Meanwhile, the folks over at Old Dominion Freight Line (ODFL) might not even know there’s a Fed meeting going on. The logistics company specializes in regional, inter-regional, and national less-than-truckload trucking services.
ODFL doesn’t pay a dividend, so skittish income investors who might consider jumping into treasuries if rates rise won’t jump ship — because they weren’t here to begin with. And being that the company is a U.S.-based trucker, the company doesn’t have to worry much about how monetary policy affects the U.S. dollar.
ODFL is definitely one of the better stocks to buy if you just don’t care what Yellen does over the next few days.
Stocks to Buy: Madison Square Garden (MSG)
Market Capitalization: $5.6 billion
Madison Square Garden (MSG) couldn’t care less about the Fed. Oh, you’re raising the federal funds rate by 25 basis points? Do you think that’s gonna stop people from buying Katy Perry tickets? Will Spike Lee stop going to Knicks games? If last year didn’t stop him, nothing will.
Madison Square Garden owns the Knicks, New York Liberty and the much more successful New York Rangers, and it also produces and distributes events like boxing, college basketball, concerts and other shows that occur in its venues.
Like ODFL, MSG doesn’t pay a dividend, and it’s utterly disconnected from any changes in the dollar or commodity prices that may result from interest rate gyrations. Up 12% in the last year, MSG stock is a fine way to insulate yourself from the FOMC meeting this week.
3 Fed-Apathetic Stocks to Buy: Stamps.com (STMP)
Market Capitalization: $1.3 billion
Finally, Stamps.com (STMP) is another inherently domestic company that won’t care about any monetary policy decisions the Fed makes this week.
The stock, which is up a remarkable 70% in 2015, has been soaring on quarter after quarter of extremely strong results. In the quarter ended June 30, revenue jumped 41% year-over-year, from $34.3 million to $48.4 million. Wall Street was looking for $43.3 million, so needless to say, STMP was one of the standout stocks this earnings season.
Non-GAAP earnings per share last quarter also beat estimates, coming in at 97 cents and easily surpassing the 71-cent consensus.
The Stamps.com business model essentially allows consumers and businesses alike to print out their own USPS postage stamps, eliminating the need to run down to the post office. They pay a nominal monthly fee for this convenience, which is where STMP takes its cut.
As long as people keep, you know… mailing things, this service should continue to grow, regardless of what interest rates do.
As of this writing, John Divine was long STMP stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
