The August CPI numbers didn’t provide any real comfort as far as inflation is concerned, with headline inflation remaining above 8%, where it’s been for months now. Though fuel prices have fallen somewhat, shelter, food, and medical care indexes were through the roof last month. We’re paying over 13% more right now for groceries compared to last year, and many Americans are reeling from the impact.
To combat this, we’ve been reviewing inflation-beating investments designed to provide a steady stream of income in the form of dividends and focus on those sectors that are primed to perform well in an inflationary environment.
One of those sectors is the commodities market – oil, natural gas, precious metals, wheat, corn, and so on. Trends in the prices of these goods can create a “domino effect” because you need them for so many different varieties of consumer products, and as they go up, prices tend to go up across the board.
But that also makes them a great natural hedge against inflation for investors. As the saying goes, “If you can’t beat ’em, join ’em.”
I’ve said before that the easiest way for retail investors to profit from higher commodity prices is to purchase commodity exchange-traded funds, exchange traded notes, or individual commodity stocks.
Of all those choices, one of my favorite commodities investments is BHP Group Limited (BHP).
Founded all the way back in 1851 and headquartered in Melbourne, Australia, BHP’s main business lines are engaged in the mining of copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal. They also have a segment to mine, smelt, and refine nickel, as well as potash development activities.
It has operations in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, and South America. I like this because it means the company has geographic diversification in its revenue stream.
The copper that BHP produces is critical for the electrification of cities and cars of the future, and the iron ore and metallurgical coal that BHP produces are critical components in the steel-making process. That makes BHP crucial for building cities and other infrastructure projects around the world, especially in China.
From fiscal 2019 to fiscal 2022, revenue increased 46.98% from $44.29 billion in 2019 to $65.09 billion in 2022.
Over the same period, net income exploded 272.02% from $8.31 billion in 2019 to $30.9 billion in 2022.
But here’s the best part…
Not only does BHP produce and sell commodities which are critical to the world’s growth, it also pays investors a massive 13.3% yield for holding the stock.
That makes BHP one of my favorite inflation-beating investments, hands down!
I’ll have more inflation-beating investment ideas next [time].
Until then, have a great week.
— Shah Gilani
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: Total Wealth Research