Early this year, I wrote that Deere & Co (DE) was among my favored plays for 2022, as was the small-cap derivative play in wheel and tire company Titan International (TWI) , which serves the agricultural and construction equipment market. Both stocks have been solid performers. DE shares are up 23% and TWI shares are up more than 31% year-to-date, well above the almost 4% year-to-date decline in the S&P 500.
But fundamentals are not static and investing strategies must adapt to the changes around us. One example of this is AMN Healthcare (AMN) , a staffing service for the health care industry. AMN, which is an Action Alerts PLUS holding along with DE, is another pick of mine for the remainder of the year. Why? Recently, a looming shortage of nurses nationwide has made the services of AMN even more critical. And, as you will see, so will other changes in our nation's population and health care workforce.
Shares of AMN are well off their recent lows following an announced management change, but AMN remains well below its late 2021 high near $125, offering a favorable risk-to-reward tradeoff at current levels.
What I really like about AMN is the long-term pain point addressed by the company. According to a National Center for Health Statistics report released in 2016, the average life expectancy in the U.S. stands at 78.8 years on average, with women outlasting men by a few years to 81.2 years of age vs. 76.6 years for men. By 2030, the Administration on Aging estimates that about 72.1 million people in the U.S. will be age 65 or older, more than twice the number in 2000. Baby Boomers, over the next 10 years or so, will all be senior citizens. This will result in a major structural shift in demographics. At the same time, the percentage of the U.S. population that's age 20-64, the primary working years, will further decrease. By 2030 one in five Americans is projected to be over 65 years old.
The broadening of the upper age pyramid is poised to significantly impact health care demand. The combination of the aging population and chronic conditions is a demand driver for doctors and nurses. But here's the problem: The U.S. has been dealing with nursing constraints over the last few decades. Viewed against the aging population and an aging nursing workforce with limited capacity at nursing schools, that constraint is looking more and more like an outright shortage.
According to data published by the American Nurses Association, as of 2022, there will be far more registered nurse jobs available than any other profession, at more than 100,000 per year. With more than 500,000 seasoned registered nurses expected to retire by the end of 2022, the U.S. Bureau of Labor Statistics projects the need for 1.1 million new RNs to replace retirees and fill new demand to avoid a nursing shortage. To give an idea as to how dire the situation really is, in September 2021, the American Nurses Association called on the U.S. Department of Health and Human Services to declare a nurse staffing shortage.
But it's not just nurses that are in high demand. According to data just published by the Association of American Medical Colleges, the United States could see an estimated shortage of between 37,800 and 124,000 physicians by 2034, including shortfalls in both primary and specialty care. Between now and then, the domestic population is projected to grow by 10.6% to around 363 million people, while the number of those over age 65 will grow more than 42%. That underlying shift is expected to drive demand for physician specialties that predominantly care for older Americans. At the same time, more than two of every five active physicians in the U.S. will be 65 or older within the next decade, leading to staffing concerns.
And while it may seem the pain point is several years out, in a recent publication, the U.S. Health Resources & Services Administration estimated that an additional 13,758 primary care physicians and 6,100 psychiatrists would be needed to remove Health Professional Shortage Area designations for areas with primary care and mental health shortages. One recent survey conducted by the AAMC found 35% of survey respondents said they or someone they knew had trouble finding a doctor in the past year or two, up from 25% in 2015.
To me, that sure sounds like a pain point, and I love investing in companies that benefit from pain points. That's why AMN shares -- with a multi-year price target of $140 -- is my pick for the rest of 2022.
(Real Money contributor Chris Versace is co-portfolio manager of TheStreet's Action Alerts PLUS. Want to be alerted before AAP buys or sells stocks? Learn more now. )
(AMN and DE are holdings in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells these? Learn more now.)
