The most recent consumer price inflation (CPI) hit the headlines earlier this week, which wasn’t great. The CPI, which tracks the costs of goods and services, jumped 8.5% from a year ago, just above the Dow Jones estimate of 8.4%.
Excluding food and energy, CPI increased 6.5%, which was just about in line with expectations – though it did seem to slow. Rather than the expected 0.3% increase, it only rose by 0.3% for the month. That slowdown has sparked some hope that inflation could be easing, making March the potential peak.
All of this is to say that a dollar doesn’t go as far as before. March inflation peak or not, the CPI has recently hit the highest levels in over 40 years. And this increase affects everyone across the board – including investors. With everything going on in the markets, most don’t think to reposition to benefit from the rising costs.
And while inflation isn’t a good thing, it’s also not all bad: Some businesses benefit from the increase in prices, making them some of the best stocks to buy.
So, without further ado, here are three inflation stocks to buy now…
Inflation Stocks to Buy Now, No. 3: Mondelez International
While it might not be a familiar household name, you’re sure to have Mondelez International Inc. (NASDAQ: MDLZ) products loaded up in the pantry.
With the fourth largest market share of the industry at 7.3%, the company owns some of the most iconic brands, such as Cadbury Dairy Milk, Oreo, Milka and Toblerone chocolates, and BelVita. Because of the popularity and accessibility of many of those brands, sales tend to remain reasonably steady despite rising prices.
But MDLZ really stands out in its ability to handle high costs for new products, thanks to its long-time hedging program and the uncanny ability to pass those higher costs that come with inflation on consumers without any significant hiccups in sales.
And as the easing of pandemic restrictions should also help MDLZ. That company should receive a solid boost in 2022 as global supply chains start to normalize, the travel industry opens back up, and employees return to offices.
MDLZ’s overall market share and its exposure to products that stand to benefit from improving global mobility are reasons enough to consider MDLZ as an inflation stock to buy.
Inflation Stocks to Buy Now, No. 2: AES Corp.
AES Corp. (NYSE: AES) is one of the world’s leading power companies with a wide range of power plants. AES does everything from fossil fuels to renewable energy sources like hydroelectric dams, solar installations, wind farms, and landfill gas reclamation.
But the company’s real potential lies in its renewable energy facilities.
That’s because the global renewable energy market is expected to reach $1.1 trillion U.S. dollars by 2027. And AES outlined back in 2018 a plan to cut its carbon emissions 70% by 2030 through a shift over to more renewable energy facilities.
Not to mention the company’s goal to produce less than 10% of megawatt-hours generated using coal-based power plants.
While AES stock has fallen behind compared to the broader market, that makes now as good a time as any to invest in this inflation stock at a discount. This recent weakness offers a prime buying opportunity for those looking to invest in a long-term option. AES is uniquely positioned to benefit from the global transition to clean energy.
And since energy is always in demand, AES is somewhat inflation-proof – making it one of the best inflation stocks to buy now.
Inflation Stocks to Buy Now, No. 1: Taiwan Semiconductor Manufacturing Co.
The best inflation stocks are companies that can provide unique, essential services and raise their prices as needed. Taiwan Semiconductor Manufacturing Co. (NYSE: TSM), one of the world’s largest semiconductor foundries, is one such company.
Suppose you’re a tech company like Apple or Nvidia. In that case, you’ll need the most advanced chips money can afford to give your products a leg-up on the competition. That’s where TSM comes into play. And while some companies are looking elsewhere for more cost-effective options, the process could take years.
There’s also the fact that semiconductors are still in short supply, as are the materials – like silicon wafers – to produce chips. This hampers several industries, from auto to tech, but this presents TSM with a prime opportunity to raise its prices.
In fact, TSM started this process back in August, raising the prices of its chips by 10%. As for the older chips, the ones most widely used in autos and Internet of Things tech, TSM has plans to raise prices for these by another 10% to 20% in the third quarter of this year.
The company’s price increases planned last August went into effect for the first quarter of 2022. The result was a strong revenue and net income. TSM managed to increase its annual revenue by more than 21%, and the company landed just over 16% in net income.
Between the Internet of Things, 5G, the auto industry, cloud computing, and a slew of other emergent tech in development, demand for semiconductors isn’t likely to slow – even if the economy does.
That makes TSM one uniquely resilient inflation stock to buy now.
Analysts at CNN forecast TSM stock moving as high as $160 per share – a gain of almost 62%. And though the chipmaker is down more than 20% year to date, that makes it a bargain for the opportunity it presents.
— Money Morning Staff
Tom Gentile, commonly known as America’s #1 Pattern Trader, has just released the names of 10 stocks that he believes could go up between now and December 6. These stocks have increased in price virtually every time in the last 10 years during the same specific window of time. See the full list here.
Source: Money Morning