Instead of guessing if inflation has peaked, buy these stocks instead
The market got a double whammy in a shortened trading week. On Apr. 12, the consumer price index (CPI) showed came in at 8.5%. The fact that the “core” CPI number went down gave some investors reason to believe that inflation might be peaking.
That optimism should have been quickly dispelled with the release of the producer price index (PPI) number on Apr. 13. That number came in at 11.2% year-over-year. That was the highest number ever recorded.
I don’t know whether inflation is peaking or not. My suspicion is that there’s likely to be higher numbers to come. But years of historically low-interest rates leaves stocks as the most likely place for investors to be if they’re looking for a decent return.
And the good news is that, despite the current volatility, there are some stocks that make good hedges against inflation. And the three stocks on this list are not just purely safety plays. You can get some decent growth from these stocks.
1. Nucor
As the largest steel manufacturer in the United States, it’s easy to see why Nucor (NYSE:NUE) stock has been soaring for the past year.
As the nation begins to rebuild its infrastructure, steel will be in high demand. And that demand is accelerating due to the Russian invasion of Ukraine. This has taken two of the largest steel exporters offline. Even if the conflict ends quickly, it will take some time for the economic fallout to correct itself.
All of this puts Nucor in a great position. The company’s revenue and earnings continue to grow sequentially and year-over-year. Although the stock is near its 52-week high, it continues to climb on news that it is constructing its third rebar micro mill in Lexington, NC.
2. Camping World
Camping World Holdings (NYSE:CWH) is a stock that was a huge pandemic winner. After falling below $10 a share at the onset of the pandemic, investors realized what the company offered to consumers.
That allowed the stock to trade up to a 52-week high of $49.20. But the sell-off in CWH stock has been steep, and I believe somewhere along the line investors lost the plot. Fortunately, the stock is now undervalued and that’s good news for opportunistic investors.
Revenue and earnings continue to grow both sequentially and year-over-year. MarketBeat’s Thomas Hughes wrote in February, “this is one cheap stock trading at less than 5X its earnings and yielding nearly 8%. That deal will not last.” Six weeks later, that same deal is in play for investors.
3. Walmart
Walmart (NYSE:WMT) is undervalued by traditional metrics. However, there are some catalysts in place that add to my belief that WMT stock may be getting ready to move to a higher level.
First, is that Walmart is investing heavily in health care. Investors are continuing to plow money into the energy sector. But if history is any guide, health care will be the sector that receives attention once investors feel confident that inflation has peaked.
Walmart also recently hired CFO John Rainey away from PayPal (NASDAQ:PYPL). Walmart continues to invest in its digital transformation. And the addition of Rainey should help facilitate that transition.
And since the supply chain disruption is reminding investors that inflation may be replaced by shortages, it’s important to remember the pricing power of Walmart.
WMT stock is up a modest 8% for the year and a consensus of analysts tracked by MarketBeat show another 6% upside for the stock. And let’s not forget about the dividend. While a dividend yield of 1.42% won’t do much to impress investors, the company has been increasing its dividend for 49 years. That’s more than just a little bit of security.