Fed Rate Decision Looms As Mega-Cap Earnings Pour In, Undervalued Small Caps Offer Opportunities
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The Fed is expected to keep interest rates unchanged at this week's meeting, but a rate cut could come in March or May as inflation cools. The Fed wants to achieve a soft landing for the economy.
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Several mega-cap tech stocks like Microsoft, Apple, Meta, and Amazon report earnings this week. Their outlooks will be key as stocks hit new highs.
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Small-cap stocks have lagged but remain undervalued, while large caps look potentially overextended. Small caps face challenges like rising rates and recession fears.
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Four undervalued small-cap stock picks are recommended Sealed Air, Stericycle, Ingredion, and Vontier. All have narrow moats and trade at discounts to fair value.
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Vontier follows a Danaher-like acquisition model, buying moatworthy companies and boosting margins through efficiencies. The other small-cap picks benefit from changing industry trends.