Two Stocks To Buy After FOMC Meet

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Dec 18, 2014
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The FOMC meet has given much needed respite to the markets and US stocks surged after the meeting outcome. This article looks at the key points in the meeting and two stocks that investors can consider buying after the FOMC meet.

The first point I want to make is that US equities will continue to rally into 2015 after the FOMC meet as because of the strong resilience the economy has shown when other developed economies are struggling for growth.

Coming to the positive factors in the FOMC meet, the important point in the press release is as follows –

“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

The FOMC also says in its statement that it will be “patient” in beginning to normalize the stance of monetary policy.

These statements point to further delay in interest rate hike and I believe that this is the factor that has taken the markets higher. Even if inflation is at 2% and the employment scenario remains good, the Fed is prepared to wait before increasing interest rates. The reason is to wait and watch how the economy performs amidst global slowdown and after the QE has been culminated.

With this assurance from the Fed, I believe that US equities will surge higher this festive season and US equities might continue to trend higher in 2015.

In the near-term, I believe that these two stocks will outperform the index and investors can consider exposure to these names.

Wal-Mart (WMT, Financial) – As a matter of fact, Wal-Mart has already outperformed the index in the last three months and I believe that the stock will continue to outperform the index in the coming months. US consumer confidence is at its highest levels since the financial crisis and the festive season coupled with high consumer confidence means that Wal-Mart will have a strong end to 2014 and a good beginning to 2015.

Wal-Mart also offers a dividend yield of 2.3% and a low beta of 0.26. Among the positives, Wal-Mart’s online sales have also been robust in the recent quarters and I believe that online sales will contribute to overall store sales growth in the last quarter of 2014.

Therefore, investors can consider exposure to the stock with a initial time horizon of 2-3 months and the time horizon can be extended based on how the US economy performs beyond the consumption season.

Teekay Tankers (TNK, Financial) – This might seem to be an unusual stock pick, but I believe that Teekay Tankers can provide strong returns in the coming months. I must mention here that Teekay Tankers has already surged by 68% in the last two months to current levels of $5.69. However, I expect the rally to continue into 2015.

The single biggest reason to remain bullish on Teekay Tankers is lower oil prices and China’s strategy amidst lower oil prices. As oil price remain near $60 per barrel, China is hoarding oil as strategic reserves and this has significantly increase the demand for VLCC in the last few months. With oil expected to remain at around current levels on supply glut, China will continue to import oil and the day rates for VLCC will remains robust in 2015.

I therefore expect Teekay Tankers to continue surging higher in 2015 and I believe that the company’s next quarter results will bring some positive surprises in terms of margin expansion. Therefore, Teekay Tankers is an excellent stock to hold at this point of time.

With the FOMC outcome, the broad markets are likely to remain bullish and Teekay Tankers will have the support of good market conditions to surge significantly higher from current levels.

In conclusion, the rally in US markets is likely to continue after the FOMC meet and strong economic growth will also contribute to the rally. The above mentioned stocks can outperform the index in the coming months and I believe that investors can consider near-term exposure to both these stocks. Depending on the economic activity and oil price trend, further extension of the investment idea can be considered.