These inflation-resistant stocks are thriving despite the tumultuous economic environment
- PepsiCo (PEP): Powerhouse brands and the diversified portfolio has helped it effectively navigate the macro environment.
- Microsoft (MSFT): AI is expected to supercharge its powerful software stack.
- Realty Income (O): Buoyed by a robust portfolio and high occupancy rates, the REIT surpassed its financial targets and boosted its 2023 per-share guidance.
- Read more about these inflation-resistant stocks that are defying the tide.
At the moment, we’re navigating through an economy where inflation continues to hover above the Federal Reserve’s long-term target of 2%. Therefore, savvy investors will want to focus their efforts on inflation-resistant stocks. While the worst of inflation’s peak may have been weathered last year, the persisting challenge demands keen, strong foresight. Inflation continues to chip away at the buying power of your dollars, making it imperative for you to invest in resilient stocks.
At this time, owning shares in companies that deliver essential products and services morphs into a strategic play to outpace inflation. As inflation rates continue to slow down, the potential for The Fed’s intervention to slow down brightens, shining a hopeful light on the prospects of inflation-resistant stocks while furthering the narrative of stock market resilience.
Inflation-Resistant Stocks: PepsiCo (PEP)
- Revenue Growth (YOY): 8.9%
- Revenue Growth (5-year average): 5.9%
Food and beverage behemoth PepsiCo (NASDAQ:PEP) has effectively navigated the current economic headwinds posting robust results in recent quarters. The company blew the lid off expectations this past April, reporting a 14% organic sales bump in the first quarter. Consequently, it hiked its 2023 sales forecast by an additional 8% on top of last year’s commendable 14% surge.
Moreover, despite its powerhouse brands and diversified portfolio, PepsiCo continues to crank up its investment game. It pumped its advertising and marketing budget by a robust 24% over the past four years. Additionally, it plans to spend a truckload of cash on capacity enhancement, supply chain improvement, digital solutions, and other key areas. Riding high on this wave of success, PepsiCo announced a sweet 10% dividend increase while providing a more upbeat full-year organic growth guidance.
Inflation-Resistant Stocks: Microsoft (MSFT)
- Revenue Growth (YOY): 7.8%
- Revenue Growth (5-year average): 15.2%
Microsoft (NASDAQ:MSFT) stands tall in the colossal tech coliseum and outshines most of its contemporaries. As part of its futuristic strategy, the firm has banked heavily on AI powerhouse ChatGPT, acquiring a major stake in OpenAI. This prudent move has placed Microsoft in a pole position to cash in on the burgeoning AI sphere. Moreover, AI is expected to supercharge Microsoft’s already stellar array of services, spanning software to cloud-based security.
However, the glitz of AI cannot overshadow the company’s classic repertoire. Its perennial products continue to churn out sustainable growth, underscoring the firm’s unwavering success. Its Azure cloud division is also lurking in the backdrop of Microsoft’s expansive operations, a success saga that continues to turn heads each quarter. Azure’s revenue stream has been swelling at a double-digit pace over successive quarters, creating a perfect counterweight for the more slow-moving segments of the business.
Inflation-Resistant Stocks: Realty Income (O)
- Revenue Growth (YOY): 41.9%
- Revenue Growth (5-year average): 22.9%
Anchoring the realm of real estate investment trusts, Realty Income (NYSE:O) manifests as a beacon of dependability in a rather jittery market. Especially appealing to investors with an income-focused approach, the firm blends stability with potential expansion. Riding the waves of a rather challenging market landscape, it provides consistent monthly dividends to its shareholders. Also, the REIT is powered by a powerful portfolio of commercial properties and solid occupancy rates.
Elevating its performance, the company effectively sailed past its top and bottom-line numbers, flaunting an impressive 99% occupancy rate. Additionally, the REIT hiked its 2023 guidance for normalized funds from operations per share from $4.05 to $4.15, edging past the $4.12 consensus. Factor in its laudable 26-year streak of dividend payout expansion, and Realty Income shines as an undeniable investment champion.
Dominion Energy (D)
- Revenue Growth (YOY): 26.2%
- Revenue Growth (5-year average): 9.5%
Utilities such as Dominion Energy (NYSE:D) remain steadfast amidst inflationary tides, carving out a unique niche as inherently inflation-proof investments. Dominion and its peers enjoy a competitive advantage dubbed a ‘natural monopoly.’ Despite no legal barriers hampering its competition, the towering entry barriers mean its challengers rarely dare to enter the arena.
Dominion flexes its energy muscles across several states, delivering electricity in parts of Virginia, North Carolina, and South Carolina while supplying natural gas to select regions spanning from Utah to Georgia. However, beyond its core operations, Dominion actively seeds investments in renewable energy projects. This move isn’t just smart business; it resonates with the values of millennials likely to become powerful catalysts down the road. On top of that, it yields over 5%, boasting a remarkably profitable business now.
American Tower (AMT)
- Revenue Growth (YOY): 9.7%
- Revenue Growth (5-year average): 9.7%
Navigating through inflationary headwinds with aplomb, American Tower (NYSE:AMT) effectively bolsters its financial fortress with long-term lease contracts, incorporating inflation-related rent escalators. This shrewd strategy essentially safeguards its revenues from the crippling effect of inflation while its primary business of providing wireless services retains its consumer appeal.
American Tower commands an awe-inspiring dominion of 225,000 cell towers. Moreover, as 5G technology sweeps globally, the firm will likely ride this wave, propelled by carrier network investments and soaring organic growth.
Its financial muscle, highlighted by steady growth in sales and dividends, adds an extra sheen to its investment allure. Additionally, its average funds from operations have skyrocketed by more than 8.5% over the past five years, trouncing the sector median by a staggering 297%.
Visa (V)
- Revenue Growth (YOY): 15%
- Revenue Growth (5-year average): 10%
Dominating the global stage as the largest payment processor, Visa (NYSE:V) is effectively leveraging the accelerating consumer shift towards electronic payments.
Riding high on the wave of travel spending recovery, Visa recently released solid quarterly results again in its most recent quarter. Sure, there are murmurs about potential economic slowdowns impacting consumer spending. The firm clocked impressive sales of $7.98 billion in its most recent quarter, marking an 11% uptick. It reported earnings of $2.09 per share, while its payment volume saw year-over-year growth of 10%. Moreover, its profitability remains in excellent shape, with net income and free cash flow margins at more than 50%, respectively.
As we push forward toward an increasingly cashless society, the upswing in credit card sales seems relentless. And with Visa earning a percentage from each transaction, it’s not tough to envision its revenue pool deepening over time.
Mondelez International (MDLZ)
- Revenue Growth (YOY): 12.5%
- Revenue Growth (5-year average): 3.7%
Mondelez International (NASDAQ:MDLZ) is a leading manufacturer of some of the most popular treats, such as Oreos and Cadbury. As a leading player in the consumer staples sector, Mondelez boasts a powerhouse portfolio of household brands. More importantly, these brands provide a comforting fusion of taste, affordability, and cultural resonance that has its loyal customers coming back for more regardless of inflation
Admittedly, the company, like many of its peers, has been grappling with higher input costs amidst the recent bump in inflation in commodity markets. But fear not, Mondelez appears well-equipped to mitigate these challenges, leveraging its brand strength to pass on the price increases to its growing customer base. This notion is effectively reflected in its mighty impressive profitability portfolio that has comfortably blown past historical metrics.
This post originally appeared at InvestorPlace.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
