Defensive Value Stocks Retail Investors Are Eyeing As Rates Stay Higher

With the Federal Reserve hinting that interest rates may stay higher for longer and inflation still running above target, many investors are rethinking where to park their cash. This backdrop puts fresh attention on value stocks from defensive sectors, where steadier cash flows and dividends can matter more. This article walks through three stocks from our Value Stocks screener that appear well placed in light of the latest Fed signals.

The three stocks highlighted below are just a starting sample, and the full screen surfaced 9 more companies with equally compelling narratives that are not covered here. If you want to go straight to the source and identify potential value opportunities for your own watchlist, analyze the Value Stocks (Defensive Sectors: Utilities, Consumer Staples, Healthcare) screener.

Regis Healthcare (ASX:REG)

Regis Healthcare runs residential aged care homes, dementia units, palliative care and home care services across Australia, as well as retirement and independent living villages. The company generates about A$1.26b in revenue entirely from its aged care and related services in Australia, and currently has a market cap of around A$1.9b.

Regis Healthcare sits squarely in the defensive side of the Healthcare sector. Aged care demand is supported by an aging population and government funding reforms, which can appeal when higher interest rates are unsettling more cyclical stocks. At the same time, you are dealing with a business that has negative equity, a relatively high P/E and pressure from rising staff costs and regulatory requirements, so execution really matters. For investors willing to weigh those trade offs, the combination of solid revenue drivers, home care expansion, a planned CFO transition and analyst expectations of stronger earnings creates a story that deserves a closer look.

Regis Healthcare’s revenue drivers and home care expansion are starting to look more interesting when weighed against its negative equity and higher P/E. See how analysts frame that trade off in the analyst forecasts for Regis Healthcare

Build your own defensive income and earnings screener

Regis Healthcare and the other stocks in this list all surfaced from using custom filters, and you can do the same in a few clicks. Use our flexible Screener to combine valuation, earnings outlook, balance sheet and dividend criteria, or jump straight into our curated Investing Ideas for ready made shortlists.

Australian Clinical Labs (ASX:ACL)

Australian Clinical Labs runs a broad pathology business in Australia, providing everything from routine blood tests and microbiology to advanced genetic and oncology diagnostics for doctors, patients and corporate clients. It generates all of its A$737.9 million in revenue from pathology and clinical laboratory services in Australia, which gives investors a clear, single segment exposure. The company currently has a market cap of about A$447.1 million.

Australian Clinical Labs operates in core healthcare diagnostics, a segment that some investors may view as relatively defensive when higher interest rates keep pressure on more cyclical stocks. The company is investing in automation, AI tools and digital billing to improve margins and cash collection. In addition, new genetic and cancer tests are targeting higher value work. At the same time, slower test volumes, Medicare fee cuts, rising labour costs and a dividend that is not well covered by current earnings mean investors may wish to weigh quality and risks carefully. Recent board refreshes and a CEO transition indicate a period of change, so the upcoming AGM and results cycle may be important for anyone tracking how this story develops further.

Australian Clinical Labs is pushing hard into automation and higher value genetic tests, which could reshape margins if the story plays out. See how that sits alongside slowing volumes, Medicare cuts and the latest analysis report for Australian Clinical Labs

NIOX Group (AIM:NIOX)

NIOX Group focuses on medical devices that help doctors diagnose and monitor asthma and COPD, built around its NIOX VERO point of care system for measuring exhaled nitric oxide. The company generates all of its £48.7 million in revenue from its NIOX branded products and has a market cap of around £272 million.

NIOX Group gives you pure exposure to a single, globally sold asthma monitoring product in a Healthcare segment that many investors see as relatively defensive when higher rates are unsettling more cyclical areas. Earnings growth has been very strong recently and margins have improved, yet the shares are priced well below an estimated fair value, which has caught the eye of analysts. The trade off is a rich P/E, modest forecast ROE, and a dividend that is not comfortably covered. The key question is whether the strength of the core NIOX franchise and its earnings profile justifies paying up for this kind of resilience in a higher for longer rate setting.

NIOX Group’s earnings strength and improved margins sit against a price that some analysts see as below fair value, which raises a clear question. Get the full context with the DCF valuation analysis for NIOX Group

Seeking Fresh Alternatives Before They Fly

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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