Stocks to Beat Low Interest Rates

Fed refugees, or savers seeking to escape punishingly low interest rates by buying shares, had better choose carefully. Since December 2008, America's Federal Reserve has kept core short-term interest rates near zero while spending richly on bonds to depress longer-term rates, too. Put euphemistically, the goal is to stimulate growth. Put cynically, it's to lavish profits on banks to prevent more of them from failing; to lure businesses and consumers into buying on credit, especially real estate; and to chase savers out of their checking accounts and certificates of deposit into the stock market, thereby creating a rally, the glow of which will brighten the mood of shoppers.

The plan has worked too well. U.S. share prices have doubled since March 2009. Dividend yields have plunged. Commodities have soared, too. All manner of risky securities have found eager buyers of late--even dodgy mortgages. That means investors who are just now spending bank savings to buy into the market rally risk buying high. The safeguard against that is to pick through the stock market's bargain bins for merchandise that's likely worth more than its price. There are still good names to be had on the cheap.

Source: SmartMoney

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