22V Research, an investment research firm, has compiled a list of stocks that do well in times of rising interest rates.
The list includes pharmacy chain Walgreens Boots Alliance WBA, medical device maker Medtronic MDT, and drug companies Vertex Pharmaceuticals VRTX and Viatris VTRS, Barron’s reports.
22V created the list by combing through the S&P 500 to find the stocks with the highest historical correlation to changes in both the real federal funds rate and the real 10-year Treasury yield — combining a short-term and a long-term rate.
Each of the four stocks has a lower forward price-earnings ratio than the S&P 500, has outperformed the index so far this year and isn’t economically sensitive, according to Barron’s.
Walgreens has the highest correlation to the real fed funds and 10-year Treasury rates. It has climbed 2% year to date, compared to a 5.9% drop for the S&P 500.
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Medtronic has the sixth highest correlation, and it has gained 2.6% so far this year.
Vertex has the second highest correlation to interest rates, and it has gained 4.1% so far this year.
Viatris has the fourth-highest correlation to interest rates, and it has risen 8.2% so far this year.
As for Walgreen’s, Morningstar analyst Dylan Finley raised his fair value estimate to $48 from $44, after a strong earnings report earlier this month. But that still puts Walgreen’s in overvalued territory, as it closed at $53.18 Thursday, down 0.65%.
As for the earnings, “Walgreens' reported stellar results in the first fiscal quarter of 2022 [ended Nov. 30] , led by strong performance across all segments,” Finley wrote.