The Fed's promise of low interest rates is exciting news to both investors and companies. I have picked five stocks that are going to be positively impacted by the low interest rate environment. These stocks are trading at cheap valuations too. The companies are performing better than their peers and are expected to do so in the future too.
Merck & Company, Inc. (MRK) is a pharmaceutical company that engages in the provision of health solutions. Shares of the company are currently trading at around $39. The company has a market capitalization of $118 billion. A beta value of 0.54 indicates that shares of Merck & Company are not volatile. It currently has a profit margin of 9% and a dividend yield of 4.3%.
GlaxoSmithKline plc (GSK) is a competitor of Merck. While Merck reported a price-to-earnings ratio of 28, GlaxoSmithKline reported the same ratio at 44. GlaxoSmithKline also has a higher price-to-sales ratio of 5.2 versus Merck's 2.4. Both these ratios indicate that Merck is cheaper than GlaxoSmithKline. Pfizer, Inc. (PFE) is another competitor of Merck and it has a lower dividend yield of 4.1%. I am bullish on Merck due to an expected comeback by the pharmaceutical sector. Analysts estimate that Merck's earnings-per-share value is expected to grow by almost 2% in 2012.
Yamana Gold, Inc. (AUY) is a miner of gold and other precious metals. Shares of the company are currently trading around $17. The company traded within a narrow range of $11.10 and $17.47 per share over the last 52 weeks, indicated by the company's low beta value of 0.37. Yamana Gold reported a profit margin of 27% and a dividend yield of 1.3%.
AngloGold Ashanti Ltd. (AU) is a competitor of Yamana Gold. AngloGold reported lower gross and operating margins of 39% and 29% versus Yamana Gold's 66% and 40% respectively. AngloGold also had a higher price-to-earnings ratio of 88 versus 22.7 reported by Yamana Gold. The company's price-to-sales ratio was also lower at 6 versus AngloGold's 15.5. These ratios indicate that Yamana Gold is trading cheaper than AngloGold. AngloGold and Kinross Gold Corporation (KGC) reported lower dividend yields of 1% and 1.1% respectively. With interest rates slated to remain at low-levels until late 2014, gold mining companies will get an increase in investor interests. Yamana Gold, being one of the best-performing companies in its sector, is looking to return significant investments in 2012.
Sirius XM Radio Inc. (SIRI) engages in the provision of satellite radio services. It has a market capitalization of $7.8 billion. Shares of the company are currently trading at around $2. Sirius generated a return on equity of 62% and a profit margin of around 9%.
Radio One, Inc. (ROIA) is a competitor of Sirius. Radio One only generated a return on equity of around 1% and it had a negative profit margin of 0.8%. Radio One also has a levered free cash flow of -$9.5 million while Sirius had a levered free cash flow worth $475 million. Sirius' operating margin of 22% is higher than Radio One's 15%. All-in-all, Sirius is trading cheaper than its competitor. It is also doing quite well in terms of investor returns. The company recently announced an increase in subscriber additions, which is good news for the investors of Sirius. I am bullish on the stock.
Bank of New York Mellon Corporation (BK) is a financial services company. The company has a market capitalization of $24.5 billion. Shares of the company are currently trading at $20 per share. The company reported a profit margin of 17% and a dividend yield of 2.4%.
State Street Corporation (STT) is a competitor of the Bank of New York. State Street reported a higher price-to-earnings ratio of 10.4 and a price-to-sales ratio of 2 versus the Bank of New York's ratios of 10 and 1.7 respectively. The Bank of New York generated an operating margin of around 29%, which is greater than the industry's average of 26.5%. The Bank of New York has recently started offering hedge funds to clients, which are more transparent in nature. It has also been involved in recent share-buybacks, indicating that its managers view the bank's stock positively.
Caterpillar, Inc. (CAT) is a construction-based company. It has market capitalization of $72.5 billion. Shares of the company are currently trading at $112. Over the last 52 weeks its shares have traded between $67.54 and $116.55 per share, as indicated by the company's high beta value of 2.11. Caterpillar generated a return on equity of 35% and a profit margin of around 8%. Also, it reported a dividend yield of 1.7%.
Volvo AB (OTCPK:VOLVY) is a competitor of Caterpillar. Volvo reported a gross margin of 24% and an operating margin of 8.6% while Caterpillar reported higher margins of 26.4% and 11.7% respectively. Caterpillar also had a higher earnings-per-share value of $6.54 than Volvo's $1.19. Caterpillar reported a price-to-earnings-to-growth ratio of 0.6 versus Volvo's 1, indicating that future earnings growth of Caterpillar can be bought at a lower price right now. The company is currently performing better than many of its peers, making it the obvious choice for investing in the construction industry. Most recently it reported an increase of around 60% in its profits, beating the many expectations.