Concerns about rising inflation and the Federal Reserve's plans to raise interest rates have been the main driver of market sentiment in recent months.
As such, all eyes will be on Thursday's highly anticipated report, which is expected to rise 7.3% YoY in January. If confirmed, it would be the highest inflation rate since March 1982.
With that in mind, we highlight below three proven winners from the year so far from the , , and sectors, each poised for new highs as inflation fears rattle markets and the Fed begins to tighten monetary policy.
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All three stocks have relatively low P/E ratios, as rising interest rates weigh heavily on high-growth technology names with high valuations.
1. ConocoPhillips
P/E ratio: 15.3
Market Capitalization: $118.9 Billion
Performance to date: +26.5%
ConocoPhillips (NYSE:) is one of the world's largest energy companies. The company's core activities include exploration and production of petroleum, liquefied natural gas and related products.
After ConocoPhillips made one of its strongest year-on-year starts, we expect the rally to continue in the coming weeks as inflation continues to climb and investors look for high-value value companies that thrive in a economic recovery
COP stock is up 26.5% so far in 2022, much higher than the comparable returns of both the and the same period, thanks to rising and natural gas prices.
Shares ended Tuesday at $91.33, just below their all-time high of $94.93 on Feb. 4. At current valuations, the power producer has a market cap of $118.9 billion.
ConocoPhillips' stock has a relatively low price-to-earnings ratio (P/E) of 15.3, making it cheaper than other notable names in the booming energy sector such as Chevron (NYSE:), EOG Resources (NYSE: ), Pioneer Natural Resources (NYSE :), and Devon Energy (NYSE:).
In addition, the Houston, Texas-based oil and gas company offers a relatively high annualized dividend of $1.20 per share at a yield of 2.50%, exceeding the implied return for the S&P 500, which is currently on the 1.34% state.
As a sign of how well his company has performed in the current inflation environment, ConocoPhillips' reported earnings and sales that surpassed consensus expectations on Feb. It also raised its plans to boost shareholder returns to $8 billion, primarily through share buybacks and variable dividends.
Taking that into account, COP stocks could see an increase of about 34% in the next 12 months, according to the InvestingPro model, bringing it closer to the fair value of $122.47 per share.
Chart: InvestingPro
Analysts also remain bullish on the stock, citing expectations for continued increases in oil prices approaching the essential $100 level.
2. Aflac
P/E ratio: 10.2
Market capitalization: $43.0 billion
Performance to date: +13.1%
Aflac (NYSE:), the largest provider of supplemental health and life insurance in the US, is off to a strong start in 2022 as investors pile into cyclical names with cheap valuations that can benefit from the improving economic outlook.
With a price/earnings ratio of 10.2 and an annualized dividend of $1.60 per share at a yield of 2.42%, Aflac looks like a good option for investors looking to hedge against the scorching heat in the coming months. inflation.
Insurers are often viewed as solid inflation hedge stocks, as interest rates historically rise when inflation picks up.
With US Treasury yields rising to 2% and beyond, Aflac will generate higher net income from its long-term bond investments in the coming months.
AFL – up 13.1% so far – ended Tuesday's session at a new all-time high of $66.04, earning the Columbus, Georgia-based insurance company a valuation of $43.0 billion.
Aflac reported impressive fourth quarter results on Feb. 2 for both profit and sales due to strong performance in both the Aflac U.S. and U.S. segments. as Aflac Japan, as well as improved net investment income.
Perhaps more importantly, Aflac's management remains committed to returning more capital to shareholders in the form of higher dividends and share buybacks. The company approved a 21.2% dividend increase in November 2021, marking the 39th consecutive year of a dividend increase.
Not surprisingly, the quantitative models in InvestingPro indicate a 7.1% gain in AFL stocks from current levels over the next 12 months, bringing stocks closer to their fair value of $70.74 to come.
Graph: InvestingPro
3. The Mosaic Company
P/E ratio: 9.5
Market Capitalization: $17.0 billion
Performance to date: +14.3%
As one of the world's leading producers of concentrated phosphate and potash crop nutrients, The Mosaic Company (NYSE:) has outperformed the broader market by a wide margin so far this year, thanks to a strong combination of a thriving agricultural economy and an increase in the prices of agricultural commodities.
Year-to-date, Mosaic stocks — which trade at a price-to-earnings ratio of just 9.5 — are up 14.3% in 2022 as investors have become increasingly bullish on the name given the rebound in the global commodity prices. †
MOS hit its best level since August 2015 at $45.07 on Tuesday, before closing session at $44.93, giving the Tampa, Florida-based agricultural giant a market cap of approximately $17.0 billion.
Mosaic is expected to deliver solid revenues and revenue growth when it releases its latest financial results after the closing bell on Tuesday, February 22.
Consensus forecasts are asking the fertilizer manufacturer to post fourth quarter earnings of $1.96, a 243% improvement from $0.57 earnings per share in the . Sales are expected to grow 56.5% year-over-year to $3.85 billion amid higher sales volumes and rising fertilizer prices. If confirmed, Mosaic's quarterly sales total would be the highest since the second quarter of 2014, when it had revenue of $4.43 billion.
As such, we expect Mosaic management to offer optimistic outlooks for the year ahead as the company continues to benefit from strong demand and fundamental pricing for crop nutrients in an inflationary environment.
Mosaic's strong financial performance has allowed it to return more cash to shareholders in the form of higher dividend payments as it recently announced a 50% increase in its annual dividend to $0.45 per share .
Not surprisingly, MOS stocks are currently undervalued according to the InvestingPro models and could see an increase of about 36% over the next 12 months to its fair value of $61.15.
Graph: InvestingPro
