10 Best Stocks to Buy for a Rising Interest Rate Environment

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After a prolonged run of easing speculation, the interest rate outlook has taken a shift. Back in September, the Federal Reserve increased rates by 25 basis points, and economists are now anticipating another rate hike in December, according to a recent Reuters poll. Bond markets have already reacted to yield curve changes, as the 10-year Treasury yield jumped from 3.97% in February 2026 to 5.31% during the first week of October. It came down to 4.98% by the end of October. Fed’s preferred inflation metric, Core PCE, went up by 0.3% during September to its highest reading in a year. Do check Insider Monkey’s list of 10 Stocks Analysts Just Downgraded.

Market participants see this as an uncomfortable mix. Elevated interest rates increase the discount rate on projected earnings, which adversely affects the richly valued growth names. They also take a toll on highly leveraged businesses and make bond-like stocks such as utilities and REITs appear less attractive. We recently provided an expanded list of 10 Buy the Dip Stocks Insiders Are Loading Up On After the Recent Market Sell-Off.

But tightening cycles do not necessarily bring bad news for all businesses. Some segments benefit as rates climb, while others carry strong pricing power and balance sheet strength to navigate through them. Insurance players can reinvest their float at relatively higher yields, as indicated by the CEO of the largest P&C insurance company in the world in October, who highlighted a direct correlation between operating income and rising rates.

Similarly, banks have the opportunity to widen the gap between what they earn on loans and what they pay on deposits. With that backdrop, let’s explore our 10 Best Stocks to Buy for a Rising Interest Rate Environment.

10 Best Stocks to Buy for a Rising Interest Rate Environment

Methodology:

To identify relevant stocks for this article, we screened U.S.-listed companies that the financial media have tied to the prevailing interest rate backdrop. Also, we only shortlisted stocks with market capitalizations above $2 billion and at least 15% upside potential as of the November 10 closing. From that list, we selected 10 stocks with the most hedge fund investors, using Insider Monkey’s Q2 2026 hedge funds database. Finally, we ranked them in ascending order of the number of hedge fund holders.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).

10. Affiliated Managers Group Inc. (NYSE:AMG)

Number of Hedge Fund Holders: 42

The asset manager partners with a global network of independent investment firms, acting as a long-term strategic equity investor delivering a broad array of investment strategies. Along with its alternative fund affiliates, it often holds a significant amount of cash proceeds, short-term instruments, and reserves, which yield higher interest income when short-term rates go up.

A high interest rate environment also benefits AMG through more favorable valuation multiples, which allows it to invest across new credit-focused and alternative partner firms. Here is how Ariel Investments reflected on Affiliated Managers Group, in its “Ariel Focus Fund” investor letter for the second quarter of 2026.

Bulls point to the company’s robust free cash flow generation capacity, a lucrative valuation compared to the underlying earnings growth, aggressive share repurchases, and a pivot toward high-fee alternative strategies. However, it faces continued headwinds across its traditional equity strategies. Earnings concentration is an added worry for investors, with significant reliance on a few major affiliates such as Pantheon and AQR.

With 2.77 million shares, BlackRock is the largest institutional investor, owning 10.72% of the outstanding shares. Other notable institutional names include Morgan Stanley and Vanguard Portfolio Management, which held 5.75% and 5.38% of outstanding shares, respectively.

9. Fair Isaac Corp. (NYSE:FICO)

Number of Hedge Fund Holders: 50

With a market capitalization of close to $ 15.5 billion, Fair Isaac Corp. (NYSE:FICO) is expected to witness potentially lower mortgage originations and refinancing volume due to rate hikes. However, it would benefit from more prudent credit management as the focus on creditworthiness and credit scores increases in such an environment.

The company’s regulatory moat within the US mortgage credit scoring space weakened back in early September, as the Federal Housing Finance Agency (FHFA) ended a limited pilot program by instructing Fannie Mae and Freddie Mac to accept VantageScore 4.0 from approved mortgage lenders.

However, it still made our recent list of 10 Best 52-Week Low Technology Stocks to Buy According to Analysts, ranking #4. FICO scores continue to be the industry benchmark for loan approvals and creditworthiness investigations. This results in a deep economic moat for the business, making its core operations highly resilient to economic cycles given lenders’ reliance on credit risk metrics.

BlackRock is the largest institutional stakeholder in the company, as per the Yahoo Finance database, holding 2.09 million shares. This translates into 9.66% ownership in the company. Other notable stakeholders include Vanguard Capital Management and Capital Research Global Investors with 6.84% and 6.00% ownership, respectively.

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