In this article, we will look at 10 best stocks to buy to protect against inflation in 2022 and beyond.
CPI For May 2022
On June 10 the U.S. Bureau of Labor Statistics released data that tracked the consumer price index for May 2022. The CPI for all urban consumers marked its largest 12-month increase since December 1981, rising by 8.6% year-over-year in May 2022. Moreover, the all items less food and energy index rose 6.0% year-over-year. The energy index recorded a 34.6% increase year-over-year, the largest 12-month increase since September 2005. The food index rose 10.1% year-over-year, the largest 12-month increase since March 1981.
The Fed Hikes Interest Rates
In its attempts to combat inflation, this June, the Fed announced another rate hike and raised interest rates by 75 basis points bringing its benchmark Federal Funds rate to a range of 1.5% to 1.75%. This is the largest interest rate increase since 1994 and the Fed will continue to raise interest rates in 2022 to curb inflation, which is currently at a 40-year high.
Where To Put Your Money
According to research conducted by Hartford Funds, which examined inflationary periods from 1973 to 2021, equities outperformed inflation 90% of the time when the average inflation rate was below 3% and rising. However, as soon as inflation exceeded the 3% mark in history, the returns of equities suffered.
Rising interest rates and skyrocketing inflation can leave investors troubled about where to put their money to hedge against inflation. Historically, certain sectors have proven to be more resilient to inflation and have helped investors navigate through volatile times. These sectors, according to the study conducted by Hartford Funds, were primarily energy, equity REITs, and metals & mining. Hartford Funds found that the energy sector outran inflation 71% of the time, returning 9.0% per year on average during the forecasted period. Equity REITs beat inflation 67% of the time and delivered an average annual return of 4.7% between 1973 and 2021. Metals and mining companies were found to have outperformed inflation 47% of the time and delivered a median annual return of 8.0%.
Synovus also listed sectors it believes can be good inflation investments. Synovus found that the consumer staples, utilities, gold mining, and real estate sectors were the winning sectors for inflationary times. Dr. Derek Horstmeyer, a professor of finance at George Mason University’s Business School, conducted a study to find stocks that demonstrated inflation-proof abilities. Dr. Horstmeyer collected data about 50-year returns of public companies listed across U.S. exchanges, and also took into account the CPI for those years. He found that the inflation rate recorded a two-fold increase between three time periods: March 1973 to May 1975, April 1978 to September 1980, and February 2021 to March 2022. According to Dr. Horstmeyer, the best-performing sector during inflationary periods was the energy sector, which posted median annualized returns of 18% over the study period, followed by the materials sector which recorded a median annual return of 16.81% between 1973 and 2022.
Some of the best stocks to hedge against inflation include Newmont Corporation (NYSE:NEM), Exxon Mobil Corporation (NYSE:XOM), and The Coca-Cola Company (NYSE:KO).
Photo by Viki Mohamad on Unsplash
Our Methodology
To determine the 10 best stocks to buy to protect against inflation in 2022 and beyond, we did a careful assessment of the sectors that have demonstrated resilience to rising inflation in the past. We identified companies that have established their position in the market and have managed to maintain consumer demand, even during inflationary periods, and hence their profitability. Along with each stock we have included the analyst and investor sentiment around it. These stocks are ranked in increasing order of hedge fund holders.
10 Best Stocks to Buy to Protect Against Inflation in 2022 and Beyond
10. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 22
Realty Income Corporation (NYSE:O) is structured as a retail REIT and has ownership interests in more than 11,200 commercial real estate properties that cover 70 distinct industries. The company’s retail properties are leased to over 1000 clients across the United States, Puerto Rico, the United Kingdom, and Spain. The company is officially known as the monthly dividend company and has issued 624 consistent monthly dividends over its 53 years of operation. As of June 17, the stock has a forward dividend yield of 4.62%.
Realty Income Corporation is among the stocks to consider investing in during inflationary periods because the company is not vulnerable to supply chain constraints, and has maintained a reputation for growing its monthly dividends regardless of what economic cycle the world is in. On June 14, Realty Income Corporation increased its monthly dividend to $0.2475 per share from $0.247 per share. This marks the 116th dividend increase since the company went public in 1994. The common stock monthly dividend is payable on July 15, 2022, to investors of record at the close of business on July 1, 2022.
At the close of Q1 2022, 22 hedge funds disclosed ownership of stakes in Realty Income Corporation. The total stakes of these funds were valued at $284.88 million, down from $398.85 million in the previous quarter with 30 positions.
As of March 31, Glendon Capital Management is the most bullish hedge fund on Realty Income Corporation with stakes worth $128.68 million.
Like Newmont Corporation, Exxon Mobil Corporation, and The Coca-Cola Company, Realty Income Corporation is an inflation-proof investment option for investors looking to shelter from inflation in 2022 and beyond.
9. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 37
Prologis, Inc. (NYSE:PLD) is a global leader in logistics real estate with a focus on high-barrier, high-growth markets. On April 19, Prologis, Inc. announced earnings for the fiscal first quarter of 2022. The company reported an FFO of $1.09, ahead of expectations by $0.02. The company generated a revenue of $1.08 billion, up 5.40% year over year, and missed expectations by $12.36 million.
Prologis, Inc. is another REIT to consider investing in for an inflation hedge because the company is an industry leader and also a regular dividend payer. On May 5, the company announced that its board of directors have declared a quarterly cash dividend of $0.79 per share, payable on June 30 for investors of record on June 16. As of June 17, the stock has a forward yield of 2.83%.
On June 13, Prologis, Inc. announced that it has successfully entered into a merger agreement with Duke Realty (NYSE:DRE) by which Prologis, Inc. will acquire Duke Realty for an all-stock transaction valued at $26 billion. With this move, Prologis, Inc. will expand its footprint further in Southern California, New Jersey, South Florida, Chicago, Dallas, and Atlanta, therefore maintaining its industry-leading position. The merger is expected to reach completion by Q4 2022.
On June 6, Wells Fargo analyst Blaine Heck lowered his price target on Prologis, Inc. to $160 from $184 but maintained an Overweight rating, equivalent to Buy, on the shares.
Hedge funds are raising their stakes in Prologis, Inc.. At the end of the first quarter of 2022, 37 hedge funds were long Prologis, Inc. with stakes worth $546.54 million. This is compared to 37 positions in the previous quarter with stakes worth $544.35 million.
As of March 31, AEW Capital Management is the top shareholder in Prologis, Inc. owning over 2.02 million shares of the company. This amounts to a stake of $326.89 million.
8. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 43
Oil and gas stocks are rallying and the energy sector has shown to be inflation-proof in the past which is why Marathon Oil Corporation (NYSE:MRO) should be on investors’ radars in 2022 when inflation is reaching record-highs. On May 4, Marathon Oil Corporation reported earnings for the fiscal first quarter of 2022. The company registered an EPS of 1.02, beating estimates by $0.04. The company’s revenue for the quarter came in at $1.75 billion, up 63.68% year over year but missed expectations by $80.43 million.
Other salient features that make Marathon Oil Corporation a suitable investment option are the company’s undervalued nature and dividend policies. As of June 17, Marathon Oil Corporation has a forward PE ratio of 5.19, a trailing twelve-month dividend yield of 1.01%, and has gained 86.42% over the past twelve months.
This June, Barclays analyst Jeanine Wai raised her price target on Marathon Oil Corporation to $37 from $30 and reiterated an Overweight rating on the shares. The analyst sees a “healthy upside and compelling yield despite secular headwinds.”
Hedge funds are bullish on Marathon Oil Corporation. At the close of Q1 2022, 43 hedge funds disclosed ownership of stakes in Marathon Oil Corporation. The total value of these stakes was $1.50 billion, up from $969.10 million in the prior quarter with 40 positions. The hedge fund sentiment for the stock is positive.
In the first quarter of 2022, Fisher Asset Management raised its stakes by 2% in Marathon Oil Corporation bringing them to $217.05 million. Fisher Asset Management is the most prominent shareholder in the company.
In addition to Newmont Corporation, Exxon Mobil Corporation, and The Coca-Cola Company, Marathon Oil Corporation has managed to sustain consumer demand and hence retain its profitability even during skyrocketing inflation.
7. Barrick Gold Corporation (NYSE:GOLD)
Number of Hedge Fund Holders: 45
Gold, and more particularly gold stocks, are investors’ sanctuary during periods of rising inflation. Barrick Gold Corporation (NYSE:GOLD) is one of the largest gold mining companies in the world with strong balance sheets and production numbers, which makes it rank among the best stocks to buy to protect against inflation. The company has ownership interests in producing gold mines that are located in Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, Dominican Republic, Mali, Tanzania, and the United States.
On May 4, Barrick Gold Corporation announced earnings for the first quarter of fiscal year 2022. The company reported a revenue of $2.85 billion, down 3.48% year over year, but ahead of expectations by $105.78 million. The company registered an EPS of $0.26 and outperformed consensus by $0.02. Barrick Gold Corporation reported Q1 gold production of 990,000 ounces, down 10.1% year over year from 1.1 million ounces, due to lower output from its Carlin and Cortez mines in Nevada. However, Barrick Gold Corporation reiterated its fiscal year 2022 gold production guidance and still forecasts gold production of 4.2 million to 4.6 million ounces.
Along with its earnings release, Barrick Gold Corporation increased its quarterly cash dividend by two-folds to $0.20 per share from $0.10. The dividend is payable on June 15 to investors of record on May 27. As of June 17, Barrick Gold Corporation’s (NYSE:GOLD) year-to-date returns are up 5.74% and the stock has a forward yield of 2.0%.
On April 21, Barclays analyst Matthew Murphy raised his price target on Barrick Gold Corporation to $28 from $26 and maintained an Overweight rating on the shares.
At the close of Q1 2022, 45 hedge funds were long Barrick Gold Corporation with stakes worth $1.37 billion. This is compared to 46 hedge funds in Q4 2021 with stakes worth $958.53 million. As of March 31, First Eagle Investment Management is the dominating stakeholder in Barrick Gold Corporation with stakes worth $653.26 million.
Here is what ClearBridge Investments had to say about Barrick Gold Corporation in its first-quarter 2022 investor letter:
“Also within the structural bucket, we have selectively added to our commodity exposure with the purchase of Barrick Gold (NYSE:GOLD). Canadian mining company Barrick Gold is a play on operating improvements. The company has aggressively delevered its balance sheet and reduced capex spending to a lower level more permanently, directing its healthy free cash flow to dividends and buybacks.”
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Chevron Corporation (NYSE:CVX) is another attractive energy stock that can help investors steer smoothly through inflation. Hedge funds are raising their stakes in Chevron Corporation. Insider Monkey found 53 hedge funds bullish on Chevron Corporation with stakes worth $27.99 billion in Q1 2022. This is compared to 53 hedge funds in Q4 2021 with stakes worth $6.50 billion.
On June 9, Credit Suisse analyst Manav Gupta raised his price target on Chevron Corporation to $202 from $190 and reiterated an Outperform rating, equivalent to Buy, on the shares.
This April, Chevron Corporation posted gains for the first quarter of fiscal year 2022. The company generated a revenue of $54.37 billion, up 69.76% year over year, and beat expectations by $812.65 million. The company registered an EPS of $3.36, missing estimates by $0.08. The company also reportedly generated $7.0 billion in free cash flow for the quarter, roughly 2.3% of its current market cap which as of June 17 sits at $329.20 billion.
As of June 17, Chevron Corporation has a forward PE ratio of 9.11, a dividend yield of 3.65%, and has gained 38.13% over the past twelve months.
Warren Buffett’s Berkshire Hathaway is the leading shareholder in Chevron Corporation as of Q1 2022. In the first quarter of 2022, Berkshire Hathaway raised its stakes in Chevron Corporation by 317% bringing them to $25.91 billion.
ClearBridge Investments mentioned Chevron Corporation in its “Large Cap Value Strategy” first-quarter 2022 investor letter. Here is what the firm said:
“The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding Chevron (NYSE:CVX) benefited from higher commodity prices and was among the top contributors to first-quarter performance.”
5. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Holders: 53
Newmont Corporation engages in the production and exploration of gold. The company also explores copper, silver, zinc, and lead. The company has mining properties and ownership interests in the United States, Canada, Mexico, Dominican Republic, Peru, Suriname, Argentina, Chile, Australia, and Ghana.
In the first quarter of 2022, as announced on April 22, Newmont Corporation reported gold production of 1.34 million ounces, down 8% year over year, but also reported that its average realized gold price increased 8% year over year to $1,892 per ounce, from $1,751 per ounce in 2021. Newmont Corporation also guided to meet its production targets for the fiscal year 2022 and forecasts maintaining gold production of 6.2 million ounces for 2022. Newmont Corporation is one of the largest gold miners in the world by ounces of gold produced, and with gold being a relatively reliable investment in times of high inflation, gold stocks like Newmont Corporation present an attractive entry point for investors looking to shelter from inflation.
On June 16, Canaccord analyst Carey MacRury lowered his price target on Newmont Corporation to $80 from $87 but maintained a Hold rating on the shares.
At the close of Q1 2022, 53 hedge funds were long Newmont Corporation with stakes worth $3.52 billion. This is compared to 45 positions in the previous quarter with stakes worth $1.39 billion. the hedge fund sentiment for the stock is positive.
In the first quarter of 2022, GQG Partners raised its Q4 2021 stakes in Newmont Corporation by 183%, bringing them to $2.54 billion, and making GQG Partners the dominating shareholder in the company.
Here is what First Eagle Investment Management said about Newmont Corporation in its third-quarter 2021 investor letter:
“The largest gold miner in the world, Newmont shares lost ground in what was a volatile and ultimately down quarter for the price of gold. The Colorado-based company has continued to execute well in what has been a challenging environment. The company recently reaffirmed its full-year 2021 production guidance, but indicated that it was likely to come in at the mid to low point of the range provided as a result of disruptions from Covid-19 as well as severe weather events. It also noted that inflation pressures were likely to push its costs higher in 2021. None of this changes our opinion of the stock, which has historically offered steady production anchored in good jurisdictions, a good pipeline of organic projects, a strong balance sheet and proven management.”
4. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 61
Costco Wholesale Corporation (NASDAQ:COST) is one of the companies that has managed to maintain consumer demand for its products even with rising inflation, which makes it an inflation-proof stock to invest in. This can be reflected in the company’s revenue for the fiscal third quarter of 2022 which was announced this April. The company reported a revenue of $52.60 billion, up 16.16% year over year, ahead of expectations by $1.11 billion. The company also reportedly experienced increasing sales volumes for May 2022. As reported on June 2, Costco Wholesale Corporation reported that its sales volume for May 2022 came in at $18.23 billion, up 16.9% year over year.
Analysts are bullish on Costco Wholesale Corporation. Shortly after the company reported its sales volume for May 2022, Jefferies analyst Corey Tarlowe raised his price target on Costco Wholesale Corporation to $580 from $560 and maintained a Buy rating on the shares.
Hedge funds are raising their stakes in Costco Wholesale Corporation. Insider Monkey found 61 hedge funds long Costco Wholesale Corporation at the end of Q1 2022 with stakes worth $5.41 billion. This is compared to 57 hedge funds in Q4 2021 with stakes worth $5.40 billion.
As of the first quarter of 2022, Ken Fisher’s Fisher Asset Management is the top shareholder in Costco Wholesale Corporation with stakes worth $2.43 billion.
ClearBridge Investments mentioned several companies in its “Sustainability Leaders Strategy” fourth-quarter 2021 investor letter, one of which was Costco Wholesale Corporation. Here is what the firm had to say:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco, which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”
3. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company is another consumer staples stock that should be considered to buy to protect against inflation in 2022 because of the company’s rich dividend history and strong consumer demand. On April 25, The Coca-Cola Company announced earnings for the first quarter of fiscal year 2022. The company reported earnings per share of $0.64, beating estimates by $0.06. The company generated a revenue of $10.50 billion for the quarter, up 16.44% year over year, ahead of expectations by $670.79 million. Moreover, as of June 17, the stock has returned 6.03% to investors over the past twelve months and has a forward dividend yield of 2.98%.
On May 23, Morgan Stanley released its 15 stock ideas that can weather a bear market, and The Coca-Cola Company was one of them. Morgan Stanley analyst Mike Wilson has a $76 price target and an Overweight rating on The Coca-Cola Company.
At the end of Q1 2022, 64 hedge funds were long The Coca-Cola Company with stakes worth $29.17 billion. This is compared to 70 hedge funds in Q4 2021 with stakes worth $28.61 billion. As of Q1 2022, Berkshire Hathaway is the most prominent shareholder in The Coca-Cola Company with stakes of $24.79 billion.
Here is what ClearBridge Investments had to say about The Coca-Cola Company in its “Dividend Strategy” fourth-quarter 2021 investor letter:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
The Procter & Gamble Company has managed to sustain consumer spending and demand even in a rising inflationary environment, making it rank high among the best stocks to invest in to hedge against inflation. This April, the company posted gains for the third quarter of fiscal year 2022 in which it beat both EPS and revenue estimates. The company registered an EPS of $1.33 and beat estimates by $0.04. The Procter & Gamble Company generated a revenue of $19.38 billion, up 7.02% year over year, ahead of expectations by $687.76 million.
The Procter & Gamble Company was also named among the top 15 stocks that can weather a bear market by Morgan Stanley. As of May 23, Morgan Stanly analyst, Mike Wilson, has a $177 price target and an Overweight rating on The Procter & Gamble Company.
Insider Monkey found 72 hedge funds long The Procter & Gamble Company at the close of Q1 2022. The total stakes of these funds were valued at $6.06 billion. Of these, GQG Partners was the most bullish hedge fund on The Procter & Gamble Company, with stakes worth $1.51 billion.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation is undervalued, pays dividends, and has a track record of strong quarters. These are only some of the features that make this stock a compelling investment to protect against inflation. As of June 17, Exxon Mobil Corporation has returned 39.76% to investors over the past twelve months, has a forward PE ratio of 8.88, and a dividend yield of 3.85%. Moreover, this April the company announced market-beating earnings for the fiscal first quarter of 2022. The company reported a revenue of $90.50 billion, up 53.01% year over year, ahead of expectations by $5.62 billion.
On June 7, Credit Suisse analyst Manav Gupta raised his price target on Exxon Mobil Corporation to $115 from $102 and reiterated a Neutral rating on the shares. The analyst raised his 2022 operating EPS estimate for Exxon Mobil Corporation to $10.54 from $9.29, and also raised his 2023 operating EPS estimate for the oil giant to $10.36 from $8.71, to account for higher natural gas prices and refining earnings.
At the end of the first quarter of 2022, 83 hedge funds disclosed ownership of stakes in Exxon Mobil Corporation. The total value of these stakes came in at $8.55 billion, up from $5.38 billion in the previous quarter with 71 positions. The hedge fund sentiment for the stock is positive.
As of March 31, GQG Partners is the top stakeholder in Exxon Mobil Corporation with stakes worth $4.27 billion, up 60% from the fund’s Q4 2021 stakes.
Here is what Saturna Capital had to say about Exxon Mobil Corporation in its “Amana Funds” fourth-quarter 2021 investor letter:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
You can also take a look at 15 Best Energy Stocks to Buy Now and 10 Best Consumer Staples Stocks.
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This article is originally published at Insider Monkey.
