As you’ve likely noticed at the grocery store and gasoline pump, inflation is roaring. Consumer prices jumped 8.3% for the 12 months through April.
So which stocks can get you through rising inflation? Bank of America created a list of possibilities.
The roster contains S&P 500 companies whose relative performance has a strong positive relationship to BofA’s inflation composite indicator. The inflation statistics go back to 1975, and BofA excluded stocks with less than 20 years of data.
The list includes:
· Freeport-McMoRan (FCX), a mining company;
· Devon Energy (DVN), an oil producer;
· Applied Materials (AMAT), a semiconductor equipment maker;
· SVB Financial (SIVB), a bank holding company;
· Tapestry (TPR), parent of fashion brands Coach and Kate Spade;
· Deere (DE), an agriculture equipment maker;
· Intuitive Surgical (ISRG), which makes robotic medical equipment;
· Simon Property Group (SPG), the country’s largest mall owner;
· Mosaic (MOS), which makes fertilizer; and
· Apple (AAPL).
Deere
Morningstar analyst Dawit Woldemariam likes Deere, assigning it a wide moat. But he puts fair value for the stock at $288, well below its recent quote of $385.40.
“Supply headwinds continue to be the main story for heavy machinery companies, but we think this pressure will ease as 2022 progresses,” he wrote in a commentary. “In our view, Deere’s fiscal first-quarter results showed its continued resiliency despite a challenging operating environment.”
Woldemariam has a positive long-term view of the company. “We think it will continue to be the leader in the agriculture industry and one of the top players in construction,” he said.
“Deere’s strong brand is underpinned by its high-quality, extremely durable and efficient products. Customers in developed markets also value Deere’s ability to reduce the total cost of ownership.”
Apple
Morningstar analyst Abhinav Davuluri gives Apple a narrow moat. He puts fair value for the stock at $130, compared to its recent quote of $149.17.
“Apple reported fiscal second-quarter results that came in ahead of our estimates, despite supply chain constraints and the ongoing chip shortage,” Davuluri wrote in a commentary.
“Demand for the firm's latest iPhone 13 and MacBook Pro drove record iPhone and Mac revenue for the March quarter.”
Going forward, “we remain positive on Apple's ability to extract sales from its installed base via new products and services,” Davuluri said. “However, management expects June quarter revenue to be $4 billion-$8 billion lower than usual…. We believe the recent stretch of strong revenue growth will be difficult to maintain as Covid-19-related Mac and iPad demand subsides.”
