10 Stocks to Buy Amid Rising Interest Rates

Published February 9, 2022 at 3:08 am EST Updated August 19, 2026 at 7:04 am EDT

In this article, we discuss 10 stocks to buy amid rising interest rates.

In late January, Jerome Powell, the US central bank chief, told reporters at a news conference that the Federal Reserve was preparing for a “sustained battle against inflation” and would raise interest rates in March and bring bond purchases to a halt the same month. However, Powell reasoned that the hike would take place only if the “conditions are appropriate for doing so”. The Fed plans to use these policies to bring down inflation to around 2%. In late 2021, inflation in the US had climbed to multi-decade highs of close to 7%.

The Powell announcement served to further dent the growth stocks market. Amid rising inflation and speculation around interest rate hikes, investors had already been pulling their money out of “overvalued” businesses and stowing it away in companies that offered some kind of near-term value to shareholders. Some examples include JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), and The Home Depot, Inc. (NYSE:HD), among others discussed in detail below.

As interest rates rise, the finance sector stands to benefit the most as it increases the earnings of major banks almost overnight. The rise in interest rates generally tends to lead to a fall in home prices but external factors, like the millennial first-time home buyers, looks likely to overcome this obstacle in the coming months. The falling unemployment numbers are also adding to the impetus for a rise in interest rates. As the job market booms, the extra earnings could result in more spending on items other than retail, like appliances and cars.

Our Methodology

The companies that are best positioned to gain from a rise in interest rates were selected for the list. Special importance was given to the finance, retail, and home improvement sectors. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices.

Data from around 900 elite hedge funds tracked by Insider Monkey in Q3 2021 was used to identify the number of hedge funds that hold stakes in each firm.

10 Stocks to Buy Amid Rising Interest Rates

Stocks to Buy Amid Rising Interest Rates

10. PACCAR Inc (NASDAQ:PCAR)

Number of Hedge Fund Holders: 26

PACCAR Inc (NASDAQ:PCAR) makes and sells commercial trucks of different sizes. As interest rates rise, finding new financing for trucks will become more expensive. As the fourth quarter earnings results of PACCAR Inc indicate, the demand for new trucks remains robust. This led to a record pre-tax income growth of $306 million for PACCAR Inc in the fourth quarter of 2021, up 38% year-on-year. PACCAR Inc introduced three new truck models last year.

This is why top hedge funds hold large stakes in PACCAR Inc. Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in PACCAR Inc, with 1.5 million shares worth more than $121 million.

Just like JPMorgan Chase & Co., Bank of America Corporation, and The Home Depot, Inc., PACCAR Inc is one of the stocks that elite investors are keeping their eye on as inflation rises.

In its Q1 2020 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and PACCAR Inc was one of them. Here is what the fund said:

“Shares of truck manufacturer PACCAR Inc fell as the North American Class 8 market continued its cyclical decline, and the outlook for sales and production took another step back with the economic impact from the pandemic.”

9. The Allstate Corporation (NYSE:ALL)

Number of Hedge Fund Holders: 27

The Allstate Corporation (NYSE:ALL) provides insurance products. It is one of the top insurance stocks among hedge funds. At the end of the third quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $821 million in The Allstate Corporation, compared to 33 funds in the preceding quarter, holding stakes in the company worth $923 million.

The Allstate Corporation has grown dividend payouts consecutively for the last eleven years, outperforming peers in a tough market. The Allstate Corporation also looks set to benefit from a rise in interest rates as it has one of the most impressive investment portfolios worth nearly $100 billion. The stock offers an attractive yield of almost 3% and high single-digit annual earnings growth potential too.

In its Q2 2020 investor letter, Generation PMCA, an asset management firm, highlighted a few stocks and The Allstate Corporation was one of them. Here is what the fund said:

“The Allstate Corporation, the second largest personal auto and home insurance writer in the U.S., should see earnings expand this year, during a challenging period when most companies aren’t expected to deliver year-over-year earnings growth. Higher mortality rates from coronavirus are being offset by lower mortality outside of virus-related deaths and expense control. In auto, the benefits of lower miles driven due to the pandemic offset auto rebates. Historically, Allstate’s scale and conservative underwriting have translated to superior profitability metrics. The company is on pace to achieve a mid-teen return on equity for ’21, well above peers. However, with shares currently at 1.3x book value, The Allstate Corporation trades at a discount to competitors. We believe skepticism around recent acquisitions to diversify away from life and auto insurance (e.g., identify theft and warranties) is the reason for its discounted valuation. We expect The Allstate Corporation to continue to cast its net further afield given the long-term threat of autonomous vehicles to its automobile franchise. We are comfortable with the strategy, especially since these acquisitions are immaterial. Meanwhile, the company should continue to post peer-beating results. Our FMV estimate is $120.”

8. Ingersoll Rand Inc. (NYSE:IR)

Number of Hedge Fund Holders: 33

Ingersoll Rand Inc. (NYSE:IR) markets specialty vehicles and medical technologies. On January 20, Baird analyst Michael Halloran maintained an Outperform rating on Ingersoll Rand Inc. stock with a price target of $64, underlining that the firm was undergoing a “significant” transformation and had an “underappreciated” profile. The analyst added that Ingersoll Rand Inc. had significant margin levers looking ahead into 2022.

Ingersoll Rand Inc. remains one of the favorite stocks among elite hedge funds as the Fed prepares to raise interest rates. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Ingersoll Rand Inc., with 3.6 million shares worth more than $183 million.

In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Ingersoll Rand Inc. was one of them. Here is what the fund said:

“We also added to Ingersoll Rand Inc.. Ingersoll Rand is a global market leader with a broad range of mission-critical flow creation technologies (pumps, compressors, etc.) for industrial and medical applications. Over the past several years, a new management team has repositioned Ingersoll Rand Inc. toward less cyclical, more profitable businesses, which are supported by a stronger culture of employee engagement and continuous improvement. More recently, the company’s top-line growth has accelerated as the pandemic fades, and margins are benefiting from cost synergies achieved in its merger integration with Gardner Denver (with further runway ahead). This has boosted cash flows and enabled management to resume its successful bolt-on acquisition strategy, acquiring Seepex GmbH, a global leader in positive displacement pumps for end markets such as water, wastewater, food and beverage and chemicals, in Q2. With an increasingly visible organic and acquisition-driven growth capability, characteristics the market appears to be undervaluing, we added to our position at an attractive discount to our PMV estimate.”

7. SVB Financial Group (NASDAQ:SIVB)

Number of Hedge Fund Holders: 45

SVB Financial Group (NASDAQ:SIVB) operates as a diversified financial services firm. On January 10, investment bank Morgan Stanley assumed coverage of SVB Financial Group stock with an Overweight rating and a price target of $985. Analyst Manan Gosalia said that the company was expected to beat market estimates on earnings by 25% in the fourth quarter of 2021, citing higher fee income versus consensus expectations as one of the reasons behind the bullish view.

SVB Financial Group was also recently named among a group of banks expected to benefit from a rising rates environment by Morgan Stanley. The bank continues to witness top hedge fund investment. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in SVB Financial Group, with 641,591 shares worth more than $415 million.

In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and SVB Financial Group was one of them. Here is what the fund said:

“Among our top contributors was SVB Financial Group. SVB Financial Group is a leading provider of banking services to the innovation economy across the US and in key international markets. Headquartered in Silicon Valley, SVB Financial Group offers financial products to clients in the technology, life science/health care and private equity/venture capital. Total client funds increased 51% to $243 billion in 2020—one of the company’s strongest years—as investors seek differentiated returns in innovative private companies. SVB’s high level of client service and long experience in the industry give it not only a historical data and knowledge advantage, but also a reputational edge. We believe this enables the company to quickly bring products to market and make speedy underwriting decisions. Given SVB’s strong profit growth comes at a time when net interest margins are depressed, we believe shares are priced attractively and added to our position.”

6. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 55

Costco Wholesale Corporation (NASDAQ:COST) owns and runs membership warehouses. The company is one of the top hedge fund picks in the retail sector. At the end of the third quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $4.39 billion in Costco Wholesale Corporation, up from 54 in the preceding quarter worth $4.32 billion.

Even though the retail sector underperformed the wider market in late 2021 and early 2022 due to the rise in virus cases and weaker-than-expected holiday sales numbers, Costco Wholesale Corporation continued to climb in this tough period, reporting sales of $15.6 billion in January, up 15.5% year-on-year. As interest rates climb, Costco Wholesale Corporation is expected to further benefit as spending on consumer staples and household appliances surges as a result of a boom in housing and employment.

Along with JPMorgan Chase & Co., Bank of America Corporation, and The Home Depot, Inc., Costco Wholesale Corporation is one of the stocks that hedge funds are buying as interest rates climb.

In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation was one of them. Here is what the fund said:

“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale Corporation (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco Wholesale Corporation shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.

Analysts also complained about Costco Wholesale Corporation raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”

5. The Home Depot, Inc. (NYSE:HD)

Number of Hedge Fund Holders: 58

The Home Depot, Inc. is a home improvement retailer. Rising interest rates usually lead to a boom in the housing market. This boom incentivises home improvement, leading to greater sales for businesses like The Home Depot, Inc.. Coupled with the supply chain capabilities and size benefits that The Home Depot, Inc. enjoys, the coming months look set to bring new growth opportunities for the company.

Elite hedge funds hold large stakes in The Home Depot, Inc. as a new fiscal year begins. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in The Home Depot, Inc., with 7.4 million shares worth more than $2.4 billion.

In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and The Home Depot, Inc. was one of them. Here is what the fund said:

“Notable contributors to the Fund’s returns this quarter (included) Home Depot. Home Depot (8.9% weight in the Fund) continued to benefit from a red-hot housing and home improvement market, delivering record financial performance in 2020. As a high return on invested capital business, any step-up in growth results in considerable shareholder value creation. While 2021 comparable sales may not yield impressive headline results, we believe there are several secular tailwinds supporting continued housing investment, including millennials entering prime household formation/peak earnings years, relatively low interest rates, and government policies.

Home Depot (8.9% weight in the Fund): The big orange sign of Home Depot is a familiar sight for homeowners across the country. Despite the rise of Amazon, Home Depot has generated outstanding results for shareholders during the rise of eCommerce, even as Home Depot’s end market in housing suffered the worst collapse in a century. Over the last fifteen years, a period which began at the peak of the housing bubble, Home Depot’s stock has generated annual returns of 17% a year, outperforming the S&P 500 by approximately 7% a year.

But while homeowners can attest to their continued shopping at Home Depot, they may not be aware that only about half the company is dedicated to serving Do It Yourself homeowners, with the other half acting as a key supplier to small contractors – which the company calls Pros – who depend on Home Depot as a mission critical business partner.

While the company does not report on their contractor business separately from their homeowner business, they have regularly offered comments indicating that contractors make up just 4% of their customer base, but about 45% of revenue. Basic math implies…”[read the entire letter here]

4. The Charles Schwab Corporation (NYSE:SCHW)

Number of Hedge Fund Holders: 59

The Charles Schwab Corporation (NYSE:SCHW) provides investment banking and brokerage services. It is one of the top brokerage stocks among hedge funds. At the end of the third quarter of 2021, 59 hedge funds in the database of Insider Monkey held stakes worth $4.5 billion in The Charles Schwab Corporation, compared to 72 in the previous quarter worth $4.8 billion.

On January 31, Deutsche Bank analyst Brian Bedell maintained a Buy rating on The Charles Schwab Corporation with a price target of $121, reiterating the stock as one of the top picks for 2022 based on the growth profile of the business and the synergies developed as a result of recent purchases that would drive a 25% expected earnings growth for The Charles Schwab Corporation in the coming two years.

In its Q3 2021 investor letter, Ariel Investments, an investment management firm, highlighted a few stocks and The Charles Schwab Corporation was one of them. Here is what the fund said:

“Additionally, financial services provider Charles Schwab Corporation (SCHW) was another strong performer in the period. Management has made progress increasing new and existing customer engagement through its multichannel approach and low-cost, high value product offerings—bolstering the company’s competitive positioning. Elevated interest rate expectations have been another driver of performance as SCHW reinvests deposits in securities and earns a spread. In our view, SCHW has the ability to weather various macro-economic and competitive pressures by flexing its scale and customer centric focus in support of the company’s industry leading cost advantage. We also believe the TD Ameritrade acquisition will create incremental value and further enhance SCHW’s market place standing and long-term growth trajectory.”

3. Bank of America Corporation (NYSE:BAC)

Number of Hedge Fund Holders: 72

Bank of America Corporation provides banking and financial products. It is one of the stocks best positioned to benefit from a rise in interest rates as a nominal increase in rates would lead to hundreds of millions in extra earnings for the bank. Coupled with the strong fundamentals of Bank of America Corporation, 2022 looks set to be a strong year for the company.

This is why top hedge funds remain bullish on Bank of America Corporation. At the end of the third quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $46.4 billion in Bank of America Corporation, compared to 87 in the previous quarter worth $46.5 billion.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Bank of America Corporation was one of them. Here is what the fund said:

“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”

2. Citigroup Inc. (NYSE:C)

Number of Hedge Fund Holders: 79

Citigroup Inc. (NYSE:C) is a diversified financial services holding firm. It is based in New York and has featured among the top hedge fund stocks for years. At the end of the third quarter of 2021, 79 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Citigroup Inc., compared to 87 the preceding quarter worth $6.1 billion.

Just as an interest rate hike signals a boom for the finance sector, Citigroup Inc. has been selling overseas assets in Mexico and Taiwan as part of a larger plan to prioritize positive investor returns. The market has reacted positively to the shedding of global operations, which is driving a recalibration in corporate structure at the firm as well.

In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Citigroup Inc. was one of them. Here is what the fund said:

“We fully exited position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”

1. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 101

JPMorgan Chase & Co. is a financial services company. On January 18, Barclays analyst Jason Goldberg kept an Overweight rating on JPMorgan Chase & Co. stock with a price target of $200, noting that an earnings beat in the fourth quarter of 2021 and higher than expected net interest income had offset some of the negatives for the company that included higher tax rates and less share buybacks. The analyst noted that investments would help JPMorgan Chase & Co. maintain higher returns in the coming months.

JPMorgan Chase & Co. is a leading bank stock on Wall Street, evidenced by the bullish hedge fund sentiment around the firm. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in JPMorgan Chase & Co., with 7 million shares worth more than $1.1 billion.

In its Q4 2020 investor letter, Bretton Fund, an asset management firm, highlighted a few stocks and JPMorgan Chase & Co. was one of them. Here is what the fund said:

“After a strong performance in 2019, we wrote this about our bank stocks in last year’s report: “There will be another recession sooner than later, and our banks will see larger loans losses, but we think this is more than priced into the stock, and our banks are well reserved for that eventuality.” Little did we know “sooner” really meant “a few weeks from now.” Despite the economic shock, the banks still have huge capital cushions that can absorb large loan losses. Our remaining bank investments, JPMorgan and Bank of America, increased their reserves significantly at the beginning of the Covid-19 crisis in anticipation of imminent loan defaults, but with the government stimulus and perhaps a more resilient economy than many would have guessed, actual loan losses are up only slightly. They might happen later in 2021, but with an additional stimulus package and the vaccine rolling out, the large-scale losses may not be as bad as most people predicted. The bigger drag on the banks’ earnings power is lower rates, which in our opinion will persist for a long time. Despite this drag, we estimate both JPMorgan and Bank of America will continue to grow revenue and earnings over the next few years, while we believe their stocks remain bargains in a somewhat expensive market. JPMorgan’s earnings per share declined 17% last year, and its stock returned -5.5%. Bank of America’s earnings, which are more sensitive to interest rates, were down 32%, and its stock returned -11.6%.”

You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.

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