3 stocks set to benefit from upcoming interest rate cuts

You can think of the S&P 500 and NASDAQ 100 indexes as the sunshine that makes the rest of the stock market thrive or crash. As they’ve been hitting all-time highs lately, you’ll notice that not all stocks have joined the party. Probably taking into account the potential interest rate cuts that the Federal Reserve (the Fed) is looking to make later this year, some stocks have a lot of catching up to do.

Falling behind the bull run, three stocks stand out as opportunities to catch the rally before it arrives. With an optimistic earnings per share (EPS) outlook for this year, the price action has yet to reflect the future growth of these stocks.

Watch the next price action and developments in SoFi Technologies Inc. NASDAQ: SOFI, CleanSpark Inc. NASDAQ: CLSKand even Albemarle Co. NYSE: ALB. This stock selection strategy is as simple and elegant as this cycle can be, with above-average EPS growth at below-average prices relative to the rest of the market.

The root of all profit

Lower interest rates can impact the entire market and even other asset classes such as real estate and cryptocurrencies. This is why you can build a proper portfolio around a trend that is more than accepted by the broader markets.

While the timing and magnitude of these rate cuts remain uncertain, the FedWatch tool CME Group Inc. NASDAQ: ECM tells traders to bet on May or June this year. This means there is a small – and last – window of opportunity to prepare before the move.

By focusing on three sectors, you can take advantage of the three best stocks to stay ahead of this trend. In the world of real estate, SoFi Technologies is likely to get busy in the coming months. As lower interest rates make mortgage financing cheaper and more convenient, new homebuyers may turn to SoFi for their financing solutions.

Additionally, the National Association of Realtors (NAR) eliminated agent commissions, making homebuying more accessible and affordable.

Cryptocurrencies like Bitcoin also tend to rise (as they have) when interest rates are cut. As markets begin to seek out – and justify – riskier assets when rates are low, it is not the currency itself but those who mine it who profit the most, and this is where CleanSpark comes in.

Finally, increased economic activity, such as manufacturing, can increase oil prices. The Goldman Sachs Group Inc. NYSE:GS he expects oil to reach $100 a barrel this year, making alternative fuel and energy sources more attractive.

Among these are solar stocks, whose batteries must store energy for cloudy days to keep the panels running. Because Albemarle supplies the lithium materials for storage, analysts are everywhere today.

Wall Street Has Spoken: 3 Top Picks

Analysts expect EPS growth of up to 257% over the next 12 months, giving you enough reason (with a thesis you know by now) to consider SoFi stock. Since this stock is trading at 60% of its 52-week high, it lags behind the rest of the tech names.

THE SPDR fund for the selected technology sector NYSEARCA: XLK has performed 23% over the past six months, while SoFi has fallen 18%. This massive gap and industry-leading EPS growth are why institutions like Vanguard Group bought up to $53 million worth of SoFi shares as of March 2024.

Moving on to the potentially best way to take advantage of Bitcoin’s rally, CleanSpark is expected to see growth of up to 128% in its EPS this year. The reasoning stems from the profit margins that will hit the company after being able to sell its mined Bitcoins at higher prices.

Since the stock trades at a forward P/E ratio of 455x, the market must have a good reason to pay that much for the stock’s future earnings. One reason could be the expectation of an earnings recovery, as analysts are generally conservative in their projections so as not to get involved.

Last but not least, Albemarle shares are trading at just 50% of their 52-week high price. Analysts expect a bold 106% jump in EPS this year, accompanied by a $176 price target that calls for a 44% upside from where the stock trades today.

Albemarle’s forward P/E of 17.6x puts it above 36%. Dow Inc. NYSE: DOW and its forward P/E valuation of 12.9x. Again, there has to be a good reason why the market is willing to pay a premium for this stock’s future earnings; now you know what this reason is.

Before you consider EDI, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and DOW wasn’t on the list.

While DOW currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here