JPMORGAN: The biggest risk to stocks is from rising rates, but these 19 will be resilient

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Arnd Wiegmann/Reuters

The Federal Reserve did the expected this week and raised its benchmark interest rate.

If there are no sudden shocks to the economy, the Fed plans to continue lifting rates, after leaving them near zero for about a decade.

In a note Friday, JPMorgan equity strategists said rising rates and a stronger dollar are the biggest risks to their bullish outlook for stocks in 2017.

“While the low interest rate environment has been a headwind for financials, it has been a boon for the remaining ten sectors that have $4 trillion in aggregate outstanding debt,” said Dubravko Lakos-Bujas, head of US equity strategy. “We expect this benefit to gradually reverse with rising yields.”

He added, “Industries more likely to be resilient to rising rate environment should be asset-lite and cash-rich (i.e., Financials, Software, Internet, and Healthcare Equipment.).” These companies would continue to have a low interest expense, or payments due on their lines of credit.

“The companies screen as the having the highest average ranking across S&P 500 companies in the following three categories: 1) low average capex as % of revenue and low average PP&E as % of assets, 2) low average net debt as % of assets, 3) and high average net income margin.”

The closer a company’s ranking is to 500, the better.

Here are 19 of those companies that would benefit from rate hikes:


Analog Devices

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REUTERS/Toru Hanai

Ticker: ADI

Industry: Semiconductors

Total ranking: 397

Year-to-date performance: 33.1%

Source: JPMorgan


Affiliated Managers Group

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Carl Court/Getty Images

Ticker: AMG

Industry: Capital Markets

Total ranking: 407

Year-to-date performance: -5.2%

Source: JPMorgan


Ameriprise Financial

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Zachary Korb/Flickr

Ticker: AMP

Industry: Capital Markets

Total ranking: 394

Year-to-date performance: 7.5%

Source: JPMorgan


BB&T

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Jim Young/Reuters

Ticker: BBT

Industry: Banks

Total ranking: 410

Year-to-date performance: 24.2%

Source: JPMorgan


Bank of New York Mellon

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Thomson Reuters

Ticker: BK

Industry: Capital Markets

Total ranking: 425

Year-to-date performance: 17.3%

Source: JPMorgan


CA Technologies

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CA/Glassdoor

Ticker: CA

Industry: Software

Total ranking: 425

Year-to-date performance: 14.6%

Source: JPMorgan


CME Group

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Scott Olson/Getty Images

Ticker: CME

Industry: Capital Markets

Total ranking: 420

Year-to-date performance: 35%

Source: JPMorgan


Electronic Arts

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EA

Ticker: EA

Industry: Software

Total ranking: 427

Year-to-date performance: 18.6%

Source: JPMorgan


Intuitive Surgical

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Intuitive Surgical

Ticker: ISRG

Industry: Health Care Equipment & Supplies

Total ranking: 418

Year-to-date performance: 17%

Source: JPMorgan


Garmin

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Daniel McMahon / Business Insider

Ticker: GRMN

Industry: Household Durables

Total ranking: 394

Year-to-date performance: 33.2%

Source: JPMorgan


MasterCard

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Thomson Reuters

Ticker: MA

Industry: IT Services

Total ranking: 437

Year-to-date performance: 7.2%

Source: JPMorgan


Monster Beverage

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REUTERS/Fred Prouser

Ticker: MNST

Industry: Beverages

Total ranking: 446

Year-to-date performance: -10.8%

Source: JPMorgan


Northern Trust

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Courtesy of Glassdoor

Ticker: NTRS

Industry: Capital Markets

Total ranking: 402

Year-to-date performance: 24.9%

Source: JPMorgan


Oracle

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Thomson Reuters

Ticker: ORCL

Industry: Software

Total ranking: 429

Year-to-date performance: 11.9%

Source: JPMorgan


Priceline Group

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Priceline

Ticker: PCLN

Industry: Software

Total ranking: 396

Year-to-date performance: 17.7%

Source: JPMorgan


Public Storage

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Screengrab/YouTube

Ticker: PSA

Industry: Equity Real Estate Investments

Total ranking: 437

Year-to-date performance: -12.7%

Source: JPMorgan


Charles Schwab

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REUTERS/Jim Young

Ticker: SCHW

Industry: Capital Markets

Total ranking: 420

Year-to-date performance: 19.7%

Source: JPMorgan


Torchmark

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Torchmark

Ticker: TMK

Industry: Insurance

Total ranking: 420

Year-to-date performance: 29%

Source: JPMorgan


Wells Fargo

Ticker: WFC

Industry: Banks

Total ranking: 445

Year-to-date performance: 1.5%

Source: JPMorgan


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