The main reason for the stock rally earlier in November was the sharp decline of long-term interest rates. The yield on the 10-year Treasury note plunged from almost 5% to 4.5%, a big move from bond markets. Meanwhile, I continue to like two large cap names with leverage to a handful of powerful trends, writes Carl Delfeld, editor of Cabot Explorer.
Start with International Business Machines (IBM). It is a blue-chip, artificial intelligence (AI) and India play with a nice dividend yield. Known as “Big Blue,” IBM now primarily helps businesses and governments manage their information technology in the cloud era.
The stock sells at a discount to the S&P 500 multiple and the information technology sector’s forward earnings multiple. IBM has paid a dividend every quarter since 1916 and has had 28 consecutive years of dividend increases.
Next is Visa (V). It doesn’t extend credit. Rather, it provides the plumbing for financial payments and communications throughout the world.
Visa has the largest card network in the US, processing $14.5 trillion of payment volume in the last 12 months. Visa’s financial infrastructure also underpins much of the world’s commerce.
The duopoly between Visa and Mastercard (MA) is often referred to as one of the best businesses in the world, with insurmountable moats, low operating costs, and plenty of opportunities for unlocking additional value. Visa currently trades at a discount to its archrival Mastercard. This leaves it much better poised to outperform the latter going forward.
Recommended Action: Buy IBM and V.