With inflation rampaging, investors are looking for stocks of companies that can withstand or even benefit from rising prices.
Consumer prices skyrocketed 8.5% in the 12 months through March. Some companies have been able to raise their prices to avoid the pain, lifting their stocks.
For example, travel stocks rose last week, with consumers apparently willing to pay up for trips after being stuck at home throughout the covid pandemic, The Wall Street Journal notes.
Airline, hotel and cruise shares gained. Delta Air Lines (DAL) sparked the rally when one of its executives said demand is so strong that the carrier would raise fares 7.5% to 10% in the second quarter.
Delta stock soared 15% last week. Hyatt Hotels (H) climbed 11%. And Carnival Cruise (CCL) gained 7%.
Credit Suisse Stock List
In February, Credit Suisse offered a list of the top stocks benefiting from inflation.
The bank calculated the stocks’ average daily return on days when inflation rose and on days when inflation had fallen over the trailing 12 months. The company’s inflation sensitivity score represents the difference between the return on up days minus down days.
The top 50 inflation beneficiaries in the S&P 500 include:
Exxon Mobil (XOM)
Schlumberger (SLB)
Dow (DOW)
Las Vegas Sands (LVS)
Etsy (ETSY)
Norwegian Cruise Line (NCLH)
Under Armour (UAA)
State Street (STT)
Capital One Financial (COF), and,
SolarEdge Technologies (SEDG).
The list is heavy on energy and financial companies.
J.P. Morgan Stock List
Also in February, J.P. Morgan created a list of stocks that it said were likely to outperform the market and a list likely to underperform when inflation fears or expectations are on the rise.
Among the stocks on the outperformers list are Bank Of America (BAC)
Boeing (BA)
Freeport-McMoRan (FCX)
General Electric (GE)
American Airlines (AAL), and,
Avis Budget (CAR).
Among the stocks on the underperformers list are Microsoft (MSFT)
Moderna (MRNA)
Walmart (WMT)
Johnson & Johnson (JNJ)
Verizon Communications (VZ)
Procter & Gamble (PG), and,
Zoom Video Communications (ZM).
Meanwhile, in an April 18 report, Morgan Stanley strategists, led by Michael Wilson said inflation will hamper corporate earnings going forward.
“We think the positive effects of inflation on earnings growth have reached their peak and are now more likely to be a headwind to growth, particularly as inflation forces the Fed to remain max hawkish,” they wrote in a commentary cited by Bloomberg.
Interest-rate-futures traders see a 74% probability the Federal Reserve will raise rates by at least 2.25 percentage points during the rest of the year.
“Margin expectations look overly optimistic for the balance of ‘22 given the myriad of cost pressures companies face,” the strategists said.
The author of this story owns shares of Exxon Mobil, Microsoft, Walmart, Johnson & Johnson and Procter & Gamble.
