Defensive Stocks Emerge as Inflation and Rate Uncertainty Persist
As inflation remains above the Federal Reserve's target and rate expectations fluctuate, investors are rethinking their portfolio positions. Defensive sector stocks can provide a more stable ride during times of interest rate uncertainty due to their focus on essential goods and services that people tend to continue buying.
Three US defensive stocks stand out: AMN Healthcare Services, Edwards Lifesciences, and Surgery Partners. Each has unique characteristics that may appeal to investors seeking stability in the face of rising inflation and potential rate hikes.
AMN Healthcare Services helps hospitals and clinics maintain critical staffing levels through its provision of travel nurses, allied health professionals, physicians, and interim leaders. The company generates most of its $3.4 billion revenue within the US, with a significant portion coming from Nurse and Allied Solutions. Despite its essential role in healthcare, AMN faces challenges related to wage pressure, clinician shortages, and funding pressures.
Edwards Lifesciences develops medical devices for patients with advanced heart disease, focusing on transcatheter valves and surgical heart valve solutions. The company's products are used globally in hospitals to support life-saving cardiovascular procedures that often cannot be postponed due to their critical nature. Edwards generates around $6.5 billion in annual revenue from medical products, with a significant portion coming from the US.
Surgery Partners operates a network of outpatient surgical centers and surgical hospitals across the US, focusing on non-emergency procedures in various specialties. The company's stock trades at a low price-to-sales ratio of about 0.6x and has earnings expected to turn positive soon. However, Surgery Partners still reports losses and carries meaningful net debt.