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The Zacks Analyst Blog Highlights: MFA Financial, Colony NorthStar, Redwood Trust, Sutherland Asset Management and Alio Gold

Zacks Equity Research
Northern Trust (NTRS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

For Immediate Release

Chicago, IL – June 14, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include MFA Financial, Inc. MFA, Colony NorthStar, Inc. CLNS, Redwood Trust, Inc. RWT, Sutherland Asset Management Corp. SLD and Alio Gold Inc. ALO.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

5 Top Stocks to Beat the Fastest Rise in Inflation for Years

Cost of living for Americans rose last month at the fastest pace in six years, indicating a strong U.S. economy and tighter labor market. An uptick in gas prices and higher rent pushed up U.S. inflation, taking a bite out of household income and putting consumers under pressure.

In such an inflationary environment, investors should buy real estate and gold which increase in value at a rate in excess of the rate of inflation.

Consumer Inflation Fastest in 6 Years

U.S. consumer prices rose at the fastest pace in May in six years, compared with the same period in 2017, according to the Labor Department. In the 12-month period through May, the Consumer Price Index (CPI) was up 2.8%, its biggest year-on-year gain since early 2012. The core CPI measure that excludes volatile food and fuel costs rose 2.2% from last May.

Increase in cost of gasoline, medical care, rent and home prices led to an uptick in the cost of living last month. Solid demand, reduction in OPEC’s production levels and geopolitical issues propelled gas prices higher. The cost of medical care, by the way, rose following a slowdown toward the end of last year. Same can be easily said about rents and home prices.

Even though the cost of new cars, airfares and communication services has dropped, it hasn’t been able to offset the broader rise in prices of essential commodities. This rise in inflation has adversely affected household income. Inflation-adjusted hourly wage went up a meagre 0.1% last month and has remained unchanged on a year-on-year basis.

PCE Shows Heated Up Inflation

The Fed’s preferred gauge of inflation, known as the personal consumption expenditures price index (PCE), has already touched the central bank’s 2% target during March and April. The figure is now slightly below the Labor Department’s CPI.

The Fed funds rate is expected to tick up 25 basis points at the conclusion of its June 12-13 FOMC meeting, with another hike or two anticipated this year. The possibility is backed by the rise in headline inflation (read more: June Rate Hike Almost a Done Deal: Top 5 Winners).

How to Profit From Inflation?

Real estate is an obvious choice because a rise in prices increases the resale value of the property over time. Further, as the value of the property rises with inflation, the amount tenants pay in rent can be increased over time. This is how income generated from a real estate property can keep pace with the general rise in prices across the economy. A real estate property is purchased with the intention of earning a return on investment either through rental income or through future resale of the property.

When inflation is high, the value of paper currency tanks in terms of goods and services it can buy. But rising inflation is good for gold prices, as gold doesn’t lose value like currency in times of higher inflation. In fact, as inflation increases, demand for gold moves north. Silver and other metals also tend to gain value during inflationary times. However, gold is generally the headline-grabbing investment.

5 Top Picks

As inflation heats up, investing in the aforesaid areas will be judicious. Real estate can be purchased indirectly through investment in real estate investment trust (REIT), while gold can be purchased by investing in stocks of a company involved in the gold mining business.

We have, thus, selected five stocks that boast a Zacks Rank #2 (Buy) and belong to the real estate and gold space. Both the group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term.

The Zacks REIT and Equity Trust industry currently is at the top 23% of more than 250 Zacks industries, while the Zacks Mining - Gold industry is presently at the top 43%. Our research shows that the top 50% of the Zacks-ranked industries outdo the bottom 50% by a factor of more than 2 to 1.

Industry: REIT and Equity Trust

MFA Financial, Inc. operates as a REIT in the United States. The Zacks Consensus Estimate for its current-year earnings rose 7.9% in the last 60 days. The stock’s expected earnings growth rate for the current year is 3.8% versus the industry’s estimated rally of 0.2%.

Colony NorthStar, Inc. is a leading global real estate and investment management firm. The Zacks Consensus Estimate for its current-year earnings rose 1.4% in the last 60 days. The stock’s expected earnings growth rate for the current quarter is 142.9% versus the industry’s projected growth of 42.5%.

Redwood Trust, Inc. qualifies as a REIT for federal income tax purposes. The Zacks Consensus Estimate for its current-year earnings rose 16.7% in the last 60 days. The stock’s expected earnings growth rate for the current year is 20.9% versus the industry’s estimated rally of 0.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sutherland Asset Management Corp. operates as a real estate finance company and qualifies as a REIT for federal income tax purposes. The Zacks Consensus Estimate for its current-year earnings rose 4.5% in the last 60 days. The stock’s expected earnings growth rate for the current year is 14.1% versus the industry’s estimated rally of 0.2%.

Industry: Mining – Gold

Alio Gold Inc. engages in the acquisition, exploration, development, and operation of mineral resource properties including gold. Its principal assets include a 100% owned and operating San Francisco open-pit. The Zacks Consensus Estimate for its current-year earnings rose 6.9% in the last 60 days. The stock’s expected earnings growth rate for the current year is 3.3%, while it is anticipated to do even better next year, up 22.6%.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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MFA Financial, Inc. (MFA) : Free Stock Analysis Report
Redwood Trust, Inc. (RWT) : Free Stock Analysis Report
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NorthStar Asset Management Group, Inc. (CLNS) : Free Stock Analysis Report
Timmons Gold Corp (ALO) : Free Stock Analysis Report
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