We recently published a list of The 10 best defensive stocks to buy now. In this article, we take a look at how Brookfield Infrastructure Partners LP (NYSE:BIP) compares to other defensive stocks.

Defensive stocks tend to remain stable and are less affected by economic downturns. These companies operate in sectors that provide essential goods and services that people need regardless of the economic climate. Defensive stocks primarily include stocks of companies in the utilities, consumer goods, and healthcare sectors because they provide basic necessities of life. Companies in these sectors tend to have lower volatility and often pay stable dividends. They usually offer a safer investment option during times of market uncertainty.

US stocks rise sharply, but experts remain cautious

US stocks are doing well, thanks to strong economic data that has reassured investors. The S&P 500 and Nasdaq 100 have posted significant gains as they gained 4.3% and over 6% respectively in the last 5 days ending August 15. Global markets have also recovered from recent losses, and the US market as a whole has recovered from the losses it suffered in the first week of August. Investor sentiment remains strong, and US stocks are seeing continuous inflows. Moreover, Fed officials are hinting at possible rate cuts, which supports optimism that the US economy is on track for a soft landing.

However, some experts remain concerned about the future of the U.S. economy and markets and take a more conservative view. According to a July report by JP Morgan, recent market trends have benefited large, high-quality companies, particularly in technology and AI, resulting in high market concentration. However, high valuations and investor positioning may make it difficult to maintain this momentum in the second half of 2024. The report says that while U.S. market volatility is currently low, it could rise if conditions change.

According to Bruce Kasman, global growth is stable at 2.4%, with Western Europe and emerging markets recovering better and the manufacturing sector picking up again. Despite this, global core inflation is expected to be around 3% in 2024, which could limit the potential for monetary easing. Kasman warned that controlling inflation and normalizing interest rates could weaken demand and, in interaction with political factors, cause further inflation and tightening of monetary policy by central banks.

Leon Cooperman’s view on the current conditions

On August 15, Omega Advisors Chairman and CEO Leon Cooperman shared his perspective on the current economic situation CNBC Money Transfer CompanyCooperman expressed a cautious outlook on the economy, driven by two main factors. First, he is alarmed by the rapid increase in the US national debt, which has doubled from about $17 trillion in 2017 to about $34-35 trillion today. He said that this level of debt growth, which outpaces economic growth, is unsustainable and could lead to a fiscal crisis. However, the exact timing of such a crisis is uncertain. He added that none of the political parties are addressing this looming problem.

Second, Cooperman compared today’s market conditions with past periods of financial excess, such as the Nifty 50 era in the 1970s, when companies with extremely high valuations eventually went bust. He noted that the 10-year bond yield was 6.5% then, significantly higher than the current rate of around 3.9%. He believes that market valuations are not too high if the current bond yield is reasonable. However, he suspects that interest rates are too low and expects a rise in long-term interest rates, particularly the 10-year Treasury yield.

While he expects the Federal Reserve to cut short-term interest rates, which could lower borrowing costs, he believes long-term interest rates will rise, causing bond prices to fall and potentially putting downward pressure on equity valuations. If long-term interest rates rise significantly, it could make the stock market less attractive and potentially lead to a market decline.

Even though the current year has shown healthy markets with some corrections, Leon Cooperman’s expectations for the markets cannot be ignored. Cooperman is considered one of the most successful investors of the last decades. If these expectations come true, investors could turn to more defensive market sectors.

Our methodology

For this article, we used stock screeners to identify over 50 large- and mega-cap stocks from defensive sectors such as consumer staples, utilities, and healthcare. We narrowed our list down to 10 stocks with positive analyst sentiment and the highest average analyst price target as of August 16.

Brookfield Infrastructure Partners LP (NYSE:GDP)

Share price as of August 16: USD 30.96

Average analyst price target as of August 16: 22.74%

Brookfield Infrastructure Partners LP (NYSE:BIP) is a real estate investment firm focused on managing investments in real estate and alternative assets, with a focus on energy and utilities. The firm acquires and manages a broad range of assets, including utilities, transportation, midstream energy, and data infrastructure. It is one of our best defensive stocks to buy now.

Brookfield Infrastructure (NYSE:BIP) sells assets and reinvests the proceeds to improve returns for investors. The company also benefits from strong deal flow, which facilitates both asset sales and acquisitions across various sectors. Recent transactions include the acquisition of Triton International, a leading global shipping company, and investing in data centers and a semiconductor manufacturing facility in collaboration with Intel Corporation (NASDAQ:INTC). These moves position the company to benefit from ongoing advances in artificial intelligence.

Brookfield Infrastructure (NYSE:BIP) stands out as a potentially good investment opportunity due to its steady growth and dynamic investment approach. The company has made solid progress over the past few quarters, with funds from operations (FFO) up 11% in the first quarter and up 10% in the second quarter year over year. Last year’s acquisition of Triton International, the world’s largest intermodal operator, has significantly supported this growth and had a positive impact on the company’s financial results.

The company’s ability to expand its backlog, which grew 15% to $7.7 billion in the second quarter, reflects its active engagement in large-scale projects. These projects, such as energy pipeline expansion and data center buildouts, are critical to sustaining long-term growth. The data infrastructure segment currently contributes only 10% of FFO, but is expected to become a key growth driver. The company has invested heavily in this sector and expects rapid expansion that will improve its overall business performance.

In addition, Brookfield Infrastructure (NYSE:BIP) plans to raise approximately $2.5 billion through upcoming asset sales. This capital will likely be reinvested in new opportunities, leading to further FFO and dividend growth. The focus on both the stable existing sectors and promising new investments in data centers lays a solid foundation for continued success.

Brookfield Infrastructure (NYSE:BIP) has a Strong Buy rating according to the 10 analysts who have covered it. As of August 16, the average price target of $38 implies an upside potential of 22.74% from the current share price.

Total GDP takes 8th place on our list of the best defensive stocks to buy. While we recognize the potential of BIP as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you are looking for an AI stock that is more promising than BIP but trades at less than 5 times its earnings, read our report on the cheapest AI stock.

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Disclosure: None. This article was originally published on Insider Monkey.