In this article, we discuss the 5 best inflation-proof stocks. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Inflation-Proof Stocks.
5. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Altria Group, Inc. (NYSE:MO) is a tobacco company. The stock has benefited from the pandemic as cigarette sales registered a nominal increase for the first time in 20 twenty years, according to an FTC report on the industry. However, it has dipped recently after reports that Philip Morris, a Swiss-American tobacco firm, would be merging with Altria were quashed by Jacek Olczak, the CEO of the latter, in a media interview published on November 9.
Jefferies analyst Owen Bennett has a Buy rating on Altria Group, Inc. (NYSE:MO) stock with a price target of $55. In an investor note penned in October, the analyst argued that a move for Juul, an electronic cigarette firm, appeared “likely and necessary” for Altria in the near future.
At the end of the second quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $948 million in Altria Group, Inc. (NYSE:MO), up from 38 in the previous quarter worth $1.1 billion.
In its Q2 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and Altria Group, Inc. (NYSE:MO) was one of them. Here is what the fund said:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
4. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Holders: 55
Newmont Corporation (NYSE:NEM) is a mining firm with core interests in gold. During times of inflation, mining and gold stocks tend to benefit the most as people run to the metal as a savings vehicle. Newmont is one of the most stable and well-known companies in this realm. It recently declared a quarterly dividend of $0.55 per share, in line with previous. The forward yield was 3.8%.
On September 24, KeyBanc analyst Adam Josephson initiated coverage of Newmont Corporation (NYSE:NEM) stock with a Sector Weight rating, noting the leverage the firm had on a long-term gold bull market.
At the end of the second quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Newmont Corporation (NYSE:NEM), up from 43 in the preceding quarter worth $994 million.
In its Q1 2020 investor letter, First Eagle Investment Management, an asset management firm, highlighted a few stocks and Newmont Corporation (NYSE:NEM) was one of them. Here is what the fund said:
“The gold price helped support the stock price of Newmont Corporation, a Colorado-based miner with, in our view, highquality assets located in favorable mining jurisdictions in North America, South America, Australia and Africa. With what we consider an impressive portfolio of assets, strong management team, solid balance sheet and history of generating free cash flow, Newmont appears well positioned to withstand the economic disruptions related to the coronavirus pandemic.”
3. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 74
MercadoLibre, Inc. (NASDAQ:MELI) is an ecommerce firm based in Argentina. It is one of the largest companies in Latin America and thus possesses incredible pricing power, an advantage that can be put to good use during times of inflation. The firm recently posted earnings for the third quarter, reporting earnings per share of $1.92, beating market estimates by $0.63. The revenue over the period was $1.8 billion, up 61% year-on-year.
Barclays analyst Trevor Young recently kept an Overweight rating on MercadoLibre, Inc. (NASDAQ:MELI) stock and raised the price target to $2,200 from $2,100, underlining that the firm was “executing on all fronts”.
At the end of the second quarter of 2021, 74 hedge funds in the database of Insider Monkey held stakes worth $4 billion in MercadoLibre, Inc. (NASDAQ:MELI), up from 69 in the previous quarter worth $5 billion.
Baron Funds, in its Q1 2021 investor letter, mentioned MercadoLibre, Inc. (NASDAQ:MELI). Here is what the fund has to say in its letter:
“MercadoLibre, Inc., a Latin American e-commerce and FinTech platform, declined in the quarter despite reporting very strong fourth quarter results. MercadoLibre falls into a category of businesses that were net beneficiaries of last year’s lockdowns and reduced consumer gatherings that fell out of favor this quarter as investors looked toward economic reopening and normalization. We are confident in MercadoLibre’s ability to create substantial long-term value as it grows into a regional powerhouse across e-commerce and financial services.”
2. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 89
Although technology stocks do not usually make for good inflation hedges, there are a few exceptions. Adobe Inc. (NASDAQ:ADBE), the software firm based in California, is one such company. The suite of professional products that the company markets, many of which dominate the competition, are likely to give the company stable revenues even during an economic crisis since they remain central to the working of the digital economy.
Wells Fargo recently termed Adobe Inc. (NASDAQ:ADBE) the “crown jewel” of software firms, just before the company posted earnings results for the third quarter that smashed analyst expectations on earnings per share and revenue.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Adobe Inc. (NASDAQ:ADBE) with 6.2 million shares worth more than $3.6 billion.
Here is what Polen Capital has to say about Adobe Inc. (NASDAQ:ADBE) in its Q1 2021 investor letter:
“Adobe and Autodesk are both prime examples of the rotation that occurred during the quarter. Both are dominant businesses in their respective markets, which are experiencing structural tailwinds. Despite each business’s position of strength, the stocks of cyclicals and businesses with higher leverage and lower profitability were more favored this past quarter. In stark contrast, Adobe and Autodesk both have low leverage, high levels of profitability, high recurring revenues that mitigate cyclicality, and are both capital-light business models—all attributes we appreciate as investors. Adobe and Autodesk were also two of the top three performers within the Portfolio during 2020.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ:AAPL) is another technology company that makes it to our list of inflation-proof stocks. Apple is one of the most recognizable brand names in the world with incredible sales numbers and margins. Even legendary value investors like Warren Buffett have held onto the stock during times of crisis, attesting to their confidence in the company.
Apple Inc. (NASDAQ:AAPL) has been expanding into the auto sector as well, with reports that the company is planning to debut an all-electric car in 2025. Tim Cook, the CEO of the firm, recently also revealed that he owned crypto assets and was “interested” in the technology.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ:AAPL), up from 127 in the preceding quarter worth $131 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
You can also take a peek at 10 Best Micro-Cap Stocks to Invest In and Top 10 Stocks to Buy According to Charles Pollnow’s Triple Frond Partners.
