It’s always hard work to find good stocks to invest, but this becomes an especially difficult task when the market is posting new highs, and interest rates are close to zero. Stocks usually have very little competition from bonds, as investing in bonds means tying up your money for ten years in a Treasury paying 0.7%. Because of that, stocks often appear much more expensive across the board.
Still, there are lots of fabulous investments out there. The trick is to figure out which ones prove profitable among numerous shares. Here are two stocks which analysts recommend as strong-buys in September.
PennyMac Financial Services is one of the biggest mortgage servicers and originators in the U.S. The coronavirus crisis encouraged a staggering amount of monetary support from the Federal Reserve, which pushed short-term interest rates to zero and began acquiring mortgage-backed securities again.
As a result, millions of consumers can lower their monthly mortgage payments significantly by refinancing due to lowering rates. Analysts expect PennyMac to earn $15.31 per share in 2020. However, the stock is trading in the low 50s presently.
The mortgage origination business is very cyclical. The next year or two should be peak earnings because once a borrower refinances at current rates, the likelihood of another refinance is very low.
This effect is negative for the origination business. However, PennyMac Financial also has a mortgage servicing arm, which will benefit from this effect. When rates rise, the company’s portfolio of mortgage servicing assets will gain in value.
This company is a diversified homebuilder. PulteGroup has just reported a massive jump in orders at the tail end of the second quarter.
Pulte suspended land investments for a period due to the coronavirus, which will affect 2020’s numbers. However, the company saw a 77% increase in orders from first-time homebuyers. That segment still remains critical for the firm. Earnings growth is 17% this year, and analysts expect next year’s growth to be 12%.