Dollar Tree (NASDAQ:DLTR)
Dollar Tree operates discount stores in the U.S. and Canada, including 8,647 shops under its namesake banner and 8,016 Family Dollar units (as of the end of fiscal 2021). The eponymous chain features branded and private-label goods, generally at a $1.25 price. Around 45% of Dollar Tree stores’ fiscal 2021 sales came from consumables (including food, health and beauty, and household paper and cleaning products), nearly 50% from variety items (including toys and housewares), and just over 5% from seasonal goods. Family Dollar features branded and private-label goods at prices generally ranging from $1 to $10, with over 76% of fiscal 2021 sales from consumables, 9% from seasonal/electronic items (including prepaid phones and toys), 8% from home products, and 6% from apparel and accessories.
Companies that produce consumer products are also a strategic purchase during periods of high inflation, as these companies can easily increase prices to keep up with demand and production costs. Coca-Cola is 1 of the largest and longest-standing consumer goods stocks in the United States with a solid history dating back to 1892.
Coca-Cola has seen steady growth since the onset of the COVID-19 pandemic and remains one of experts’ top blue-chip stocks for 2020. As the company continues to expand into newer, healthier food and beverage markets, Coca-Cola could also be a safer choice to hedge against inflation.
With a 150-year-plus history, Nestle is the largest food and beverage manufacturer in the world by sales, generating more than CHF 90 billion in annual revenue. Its diverse product portfolio includes brands such as Nestle, Nescafe, Perrier, Pure Life, and Purina. Nestle also owns just over 23% of French cosmetics firm L’Oreal. The company has a vast portfolio of global products, with 34 brands each achieving more than CHF 1 billion in sales annually and a geographic presence that spans 189 countries.
Preformed Line Products (NASDAQ:PLPC)
Preformed Line Products is a worldwide designer, manufacturer and supplier of high-quality cable anchoring systems. It operates the business under 4 segments – communications, energy, special industries and solar. The company offers a wide range of products including control hardware, control systems, fiber optics, copper splice closures and high-speed devices.
The cable stock has a market cap of $267 million and has an EPS of $5.49. It has an annual dividend yield of $0.80 per share. Preformed Line Products trades more than 16,802 shares per day. It generated revenue of $444 million in 2019.
Federal Realty Investment (NYSE:FRT)
Federal Realty Investment Trust is a shopping center-focused retail real estate investment trust that owns high-quality properties in eight of the largest metropolitan markets. Its portfolio includes an interest in 101 properties, which includes 23.4 million square feet of retail space and over 2,600 multifamily units. Federal’s retail portfolio includes grocery-anchored centers, superregional centers, power centers, and mixed-use urban centers. Federal Realty has focused on owning assets in highly desirable areas with significant growth, and as a result, the average population density and average median household income are higher for its portfolio than for any other retail REIT.
Looking at the best inflation stocks? Did you know that in 1970 you’d only need about $.36 to put a gallon of gas in your car? If you wanted to buy a home, you could expect to pay about $23,450.00 — a far cry from the $245,000 you’d probably pay today. But why are things so much more expensive today than they were years ago?
Inflation is a general increase in prices and fall in the purchasing value of money. Inflation is a normal and regular phenomenon — and a smart investor can purchase strategic investments to hedge against it. In this article, we’ll take a look at a few hot stocks that you might want to consider investing in if you’re worried about the effects of inflation on your portfolio.
Quick Look at the Best Inflation Stocks:
Overview: Inflation Stocks
In economics, inflation is a general decline in the purchasing power of a currency. When purchasing power declines, you need more money to purchase the same amount of products as prices rise.
There are multiple factors that contribute to inflation, including:
- Market power. When a good or sector experiences a restricted supply or a lack of competitive pressures, companies can freely raise prices while maintaining sales levels. This may cause other companies and industries to also raise their prices to keep up with the necessary materials they need to conduct business. For example, if there is an oil shortage, oil companies will increase prices — but any other company that relies on oil for transportation may also need to pass these prices onto the consumer causing a ripple effect.
- Demand-pull inflation. Inflation doesn’t only result from periods of economic uncertainty — it can also be the result of overspending as well. When unemployment rates are low and consumer confidence is high, demand for particular products may increase. With a less abundant supply and more demand, prices increase. Economic expansion can lead to a permanent rise in prices even after market bursts have ended.
While inflation is typically not a positive for stocks, certain sectors may benefit from inflation. Many consumer goods stocks are efficient at keeping up with inflation as their underlying companies pass price increases along to customers. Some alternative assets even qualify as “inflation hedges” — an investment that protects the value of your money during inflationary periods.
Best Online Brokers for Inflation Stocks
From purchasing shares of thousand-dollar tech companies to hunting for stocks under $5 for day trading, becoming an investor begins with opening a brokerage account. If you don’t already have a brokerage account, consider a few of our top choices below.
Features to Look for in an Inflation Stock
Though many stocks perform exceptionally well during inflationary periods, not every company is equipped to rise in value as the value of the dollar decreases. Look for these 3 essential characteristics before investing in a company for inflation protection:
- Backed by an underlying asset. Assets (like real estate) and commodities tend to act as hedges against inflation. If you can’t purchase these assets directly, you might want to consider investing in a stock based in an inflation-resistant asset — for example, a real estate investment trust (REIT) or precious metal mining company.
- Can pass inflated costs back to consumers. The retail sector tends to do exceptionally well during inflationary periods because these companies can easily pass along the increased cost of materials to the consumer through price increases. This results in a higher earnings per share value for the company — and in many cases, an increase in value.
- Favor growth over dividends. Though many investors are attracted to dividend stocks for the income they provide, these investments tend to do poorly during a period of high inflation. Instead of searching for the highest dividend yields, consider investing in a solid growth stock in an inflation-resistant industry like oil, healthcare, food or technology.
Protect Yourself Against Inflation
Many consumers assume that inflation is entirely negative because they’re looking at inflation from the perspective of someone whose dollar doesn’t buy as many groceries, healthcare needs and other daily necessities.
However, in the context of investing, diligent investors with an eye towards the future can attempt to protect themselves and increase profits by choosing inflation-resistant industries.
No matter if you’re interested in high-value technology companies or you’re on the hunt for stocks under $20 or stocks under $10 that will increase in value over time, doing your research is essential before you place a buy order.
Frequently Asked Questions
What are inflation stocks?
Inflation stocks are shares in companies that do well during inflationary times.
Should you invest during inflationiary times?
If you do your research and invest in the right stocks, investing in inflationary times can be good investments.
What are the best inflation stocks?
See Benzinga’s list of the best inflation stocks above.