4 Healthcare Stocks to Safeguard Your Portfolio as Fed Plans Rate Hike

A rate hike is almost inevitable if inflation remains high, Federal Reserve officials believe, according to the minutes of the Fed’s latest policy meeting. A third of the committee members voted to hike interest rates last month, but the central bank preferred to adopt a wait-and-watch policy.

A rate hike influences the interest rates on various types of consumer debt, which could impact buyers’ spending power. Wall Street has been turbulent for the past two months, and a rate hike could keep markets volatile for longer.

Given this situation, it would be ideal to invest in defensive stocks such as healthcare. In this regard, Bioventus Inc. BVS, Centene Corporation CNC, Amneal Pharmaceuticals, Inc. AMRX and Cronos Group Inc. CRON are safe bets.

Fed Gearing up for Rate Hike

The Federal Reserve kept interest rates unchanged at its July Federal Open Market Committee (FOMC) meeting in the current range of 3.5-3.75%. Although this was anticipated, the Federal Reserve has long indicated that a rate hike is almost likely if inflation stays elevated.

Inflation climbed substantially in April and May, following a surge in oil prices owing to the U.S.-Iran war. Several market participants were anticipating a rate hike in July due to this. However, the central bank left rates unchanged after inflation declined in June and July.

Despite the decline, inflation remains sharply above the Fed’s 2% target. The minutes of the meeting show that the committee voted 9-3 to keep the federal funds rate unaltered. All three who voted against the decision were in favor of a 25-basis-point rate hike. These policymakers believe a small hike could help bring the situation under control to a greater extent than going for steeper hikes in the future.

The overnight borrowing rate influences the interest rates on various types of consumer debt, including mortgages, credit cards and auto loans.

Meanwhile, geopolitical tensions have escalated once again, with neither the United States nor Iran ready to get into negotiation talks. Earlier this week, the United States said that there are no immediate plans for any peace talks, nor is anything scheduled.

Oil prices have been surging once again on fears that the Middle East crisis could continue for a longer period. Higher oil prices could lead to a spike in inflation again, which will compel the Fed to hike interest rates.

4 Healthcare Stocks With Upside

Bioventus

Bioventus Inc. delivers clinically proven, cost-effective products that help people heal quickly and safely. BVS includes offerings for osteoarthritis, surgical and non-surgical bone healing. 

Bioventus has an expected earnings growth rate of 16.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. BVS currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Centene Corporation

Centene Corporation is a well-diversified healthcare company that primarily provides a set of services to government-sponsored healthcare programs, while also serving under-insured and uninsured individuals through member-focused services. CNC is also engaged in providing education and outreach programs to inform and assist members in accessing quality, appropriate healthcare services. Centene operates a capitated managed-care model, under which it receives a fixed payment per member per month from government programs such as Medicaid, Medicare and ACA Marketplace plans.

Centene Corporation has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 40.9% over the past 60 days. CNC currently carries a Zacks Rank #1.

Amneal Pharmaceuticals

Amneal Pharmaceuticals, Inc. is a diversified, global biopharmaceutical company that develops, manufactures, markets and distributes a broad portfolio of essential medicines. AMRX operates principally in the United States, India and Ireland, with executive offices in Bridgewater, NJ. Its platform spans generics, injectables, biosimilars and branded specialty medications.

Amneal Pharmaceuticals has an expected earnings growth rate of 22.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2% over the past 60 days. AMRX currently sports a Zacks Rank #1.

Cronos Group

Cronos Group Inc. engages in the investment in firms that are licensed to produce and sell medical marijuana. CRON’s portfolio includes In The Zone, Peace Naturals, Whistler Medical Marijuana Co., ABcann, Hydropothecary, Vert Medical and Evergreen Medicinal Supply.

Cronos Group has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. CRON currently has a Zacks Rank #2.

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This article originally published on Zacks Investment Research (zacks.com).

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