10 Best Stocks to Buy During Inflation (& Better Alternatives)

by Anthony Zhang

The inflation rate in the United States hit 8.5% in March 2022 - reaching its highest level in nearly 40 years. Meanwhile, the Consumer Price Index (CPI) also had the largest gain since 1982 - it was 7.9% year over year in February 2022.

On the other hand, the Federal Reserve Bank (central bank) also had the largest interest rate hikes in 2022. Now, all these changes have been quite alarming to most stock market investors.

If you’re into the stock market, how do you navigate through these tough times? What are the best stocks for inflation?

Let’s discover the best and worst stock types to combat inflation, the 10 best inflation stocks to invest in, the basics of inflation, and the pros and cons of investing during inflation.

We’ll also check out how various stocks perform and why fine wine could be the best alternative investment during inflation.

What Are the Best and Worst Stocks to Combat Inflation?

Here are some of the best stocks for inflation:

Energy
Financials
Precious metals
Consumer staples
Property Real Estate Investment Trusts (REITs)

Meanwhile, these are the stocks that usually underperform during higher inflation periods:

Mortgage providers
Communications
IT (Information Technology stocks)
Growth stocks
Consumer discretionary businesses

Now, let’s check out the inflationary returns for some of these stocks.

That brings us to the next question:

How Does Inflation Affect Stocks?

Persistently rising inflation is usually detrimental to most parts of the stock market. That’s because higher inflation leads to a higher cost of labor and materials (input costs), and often decreases retail sales volumes.

In early 2022, most investors were concerned that the inflation expectations and Russia’s invasion of Ukraine could slow down global economic growth. For this reason, the majority of US stocks fell sharply.

In April 2022, Nasdaq dropped 12.2% and was dragged into the bear market territory. Meanwhile, the S&P 500 also experienced its biggest drag when it fell by more than 7.8%.

According to the grim quarterly earnings report, most retail stocks performed poorly during the inflationary period in 2022. For example, Target lost a quarter of its earnings during this period. Its first-quarter gross margin was 5.3%, whereas the store expected 8% or higher.

Meanwhile, the grim quarterly earnings report also showed that Best Buy fell 10.5%, Home Depot slid 24%, and Dollar General fell 11.1%.

Technology stocks also experienced the biggest drag on the S&P 500. For example, Apple fell 5.6%. Meanwhile, smaller company stocks also dropped sharply - the Russell 2000 fell 3.6%.

Let’s now discover the inflation stocks that should make it to your investment portfolio.

10 Best Companies to Invest in During High Inflation Times

These are the best companies to invest in when inflation fears are on the rise:

Newmont Corp. (NYSE: NEM)
Baker Hughes Co. (NASDAQ: BKR)
BorgWarner Inc. (NYSE: BWA)
American Tower Corp. (NYSE: AMT)
Corning Inc. (NYSE: GLW)
Eastman Chemical Co. (NYSE: EMN)
KLA Corp. (NASDAQ: KLAC)
Dollar Tree (NASDAQ: DLTR)
Advanced Micro Devices (NASDAQ: AMD)
Berkshire Hathaway (NYSE: BRK.B)

1. Newmont Corp. (NYSE: NEM)

Newmont Corporation is the world’s largest producer of gold - one of the best inflation-resilient commodities. Because gold is a reliable inflation hedge, Newmont’s share price went up by 31% in 2022 (as reported by stock exchange firms on Wall Street.)

So, if you want the best stock to invest in when inflation is on the rise, Newmont Corporation deserves a spot in your portfolio.

If you want to invest in other gold companies, you can also put your money into a mutual fund or an Exchange Traded Fund (ETF) that owns gold. However, it’s always worth doing thorough research first before investing in an ETF or mutual fund.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 53.83B USD

Volume: 6.68M

P/E Ratio: 1.39

Dividend Yield: 3.24%

2. Baker Hughes Co. (NASDAQ: BKR)

This oilfield services company supplies technology and equipment to the gas and oil industry. Bank of America gave it a “buy” rating and a target stock price of $44 on April April 8, 2022.

Interestingly, Baker Hughes Co. has the highest positive correlation to inflation than any stock covered by the Bank of America. So, passionate investors should consider adding this inflation hedge to their portfolios.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 36.12B USD

Volume: 9.55M

P/E Ratio: 107.79

Dividend Yield: 2.04%

3. BorgWarner Inc. (NYSE: BWA)

BorgWarner Inc. provides drivetrain systems and other parts to the automotive industry. Although the stock experienced a 7% revenue decline in late 2021, this was better than the 15% decline recorded in the global automotive production sector.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 8.98B USD

Volume: 2.14M

P/E Ratio: 13.37

Dividend Yield: 1.81%

4. American Tower Corp. (NYSE: AMT)

This specialized Real Estate Investment Trust (REIT) operates the world’s largest broadcast towers and network of wireless communications. The company has a steady revenue growth because of the growing number of wireless subscribers worldwide.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 116.64B USD

Volume: 2.23M

P/E Ratio: 43.43

Dividend Yield: 2.28%

5. Corning Inc. (NYSE: GLW)

This company provides glass substrates to the electronics industry, and fiber optic equipment to the telecommunications industry. Bank of America gave this inflation stock a “buy” rating and a target stock price of $48 in April 2022.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 28.11B USD

Volume: 4.93M

P/E Ratio: 26.66

Dividend Yield: 3.25%

6. Eastman Chemical Co. (NYSE: EMN)

This diversified chemical services company had a 7.6% earnings per share growth in 2022. The Bank of America gave this stock a “buy” rating price target of $150 in April 2022.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 13.17B USD

Volume: 970.06K

P/E Ratio: 16.83

Dividend Yield: 2.97%

7. KLA Corp. (NASDAQ: KLAC)

KLA supplies the semiconductor industry with process control and yield monitoring systems. According to stock exchange firms on Wall Street, this company had around 20% revenue growth in 2022.

KLA generates a free cash flow margin of 31% and returns around 70% of free cash flow to shareholders. Bank of America gave this inflation stock a “buy” rating and a price target of $500 in April 2022.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 49.79B USD

Volume: 1.38M

P/E Ratio: 16.19

Dividend Yield: 1.26%

8. Dollar Tree (NASDAQ: DLTR)

This company runs discount stores in Canada and the United States. In 2022, it had a 48.1% increase in earnings per share and a 19.2% lift in gross profit.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 35.03B USD

Volume: 2.85M

P/E Ratio: 23.84

Dividend Yield: NA

9. Advanced Micro Devices (NASDAQ: AMD)

This globally renowned semiconductor producer has high pricing power. Despite persistently rising inflation, this company has been generating higher sales.

Its revenue increased by around 68% year-on-year in 2021. Meanwhile, its gross margin grew by 48%, while the operating margins rose from 9.4% to 22% between 2019 and 2022.

So, this could be the best stock to add to your portfolio during inflationary times.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 153.66B USD

Volume: 125.74M

P/E Ratio: 35.37

Dividend Yield: NA

10. Berkshire Hathaway (NYSE: BRK.B)

Berkshire Hathaway is a multinational conglomerate holding company managed by Warren Buffett and Charlie Munger.

Because of Warren Buffett and Charlie Munger’s incredible experience in the stock market, this company has navigated almost any economic downturn. No surprise, Berkshire Hathaway’s stock portfolio value increased by 10% in 2022 - from $331B to $364B.

Historical 5-Year Performance

Source: Google Finance

Market Cap: 646.71B USD

Volume: 4.23M

P/E Ratio: 0.01

Dividend Yield: NA

Now, let's take a step back and look at what inflation is, and what its indicators are.

What Are the Indicators of Inflation?

Inflation is defined as an increase in the price of goods. Meanwhile, the inflation rate is a quantitative measure that tracks the rate of change in the price of goods (expressed as a percentage.)

During surging inflation periods, you’d usually have to pay a higher price for your groceries and the items you buy at Home Depot and other stores. So, you might have to change your normal spending habits to combat the effects of rising prices.

Inflation is usually measured using the Consumer Price Index (CPI), the Personal Consumption Expenditures Price Index (PCE Price Index), and the Producer Price Index (PPI.) The Federal Reserve Bank (central bank) usually prefers gauging inflation with the PCE Price Index.

Here are the explanations of all the core indicators used to measure inflation:

PPI: A monthly measure of the average prices received by domestic producers for goods and services sold. It’s reported by the Bureau of Labor Statistics.
CPI: Measures the monthly changes in the prices of consumer products based on spending data from a household expenditure survey. It’s also reported by the Bureau of Labor Statistics.
PCE Price Index: Also measures the monthly changes in the prices of consumer goods, but it’s broader than the CPI. It’s reported monthly by the Bureau of Economic Analysis.

The Federal Reserve Bank also uses the Trimmed Mean PCE Price Index as an alternative indicator for inflation. It’s calculated by removing a certain fraction of the most extreme spending observations and taking a weighted average of the other observations.

Will inflation ever slow down?

The recent rise in long-term bond yields could help slow down inflation.

That’s because an increase in bond yields raises mortgage rates and other loans. So, this could reduce the amount of spending and eventually lower inflation.

Also, if the dollar appreciates, this could reduce the higher cost of imported goods and help tackle other inflationary pressures.

What are the Advantages and Disadvantages of Investing in Stocks During Inflation?

Whether you’re investing in large or smaller company stocks during inflation, here are some of the benefits:

Diversifies your portfolio (if you’re investing in various assets)
Preserves your portfolio value
Helps you tackle economic downturns (if you’re investing in profitable assets)

Meanwhile, here are some of the disadvantages of investing during rising inflation periods:

Diverts from your long-term investment goals
Might lead to an overweight portfolio (if you’re too heavily invested in some assets more than others)
Increases exposure to risk (if you’re investing in volatile assets)

Let’s now check if it could be worth investing in fine wine instead of stocks.

Can Fine Wine Be a Better Investment Than Stocks During Inflation?

Although real estate and precious metals seem profitable during inflation, fine wine tends to be more worth it. That’s because the fine wine market is less volatile and usually outperforms most stocks.

Also, fine wine investment doesn’t depend on global growth or the state of the economy. For example, despite economic downturns, fine wine yielded 13.6% annualized returns in the past 15 years!

Visit the Vinovest website if you want to start buying, storing, and selling the world’s finest wine bottles.

To get started, you need to sign up and provide your personal information (such as your email address.) From there, you should fund your account with $1,000+ and follow the on-screen instructions. When you finish, an investment strategist will manage your profile.

If you need investment advice or have account-related questions, you can always reach Vinovest by visiting their website. Alternatively, you can also contact the customer service team.

Combat Inflation By Investing in the Best Assets

The persistently rising inflation and interest rate hikes mean that you now have to pay higher costs for almost everything. So, you have to be careful with your normal spending habits.

Meanwhile, surging inflation can also be a problem if you’re an investor. However, you can tackle the effects of high inflation by investing in the best commodities and assets.

Here’s the good news - fine wine is one of the best assets that can help you offset inflation expectations. It even performs well when there are fears about global economic growth.

Check out the Vinovest website today to buy, store, and sell investment-grade bottles from around the world. Once you sign up, an expert will provide you with the best investment advice to ensure that you invest only in the finest bottles.