In this article, we will look at 10 stocks to profit from inflation.
Billionaire investor and hedge fund manager of the world’s largest hedge fund, Bridgewater Associates, Ray Dalio shared his views on the current economic situation that is draining Americans’ pockets. On June 21, Mr. Dalio published an article titled Reducing Inflation Will Come at a Great Cost: Stagflation on his LinkedIn page. The billionaire is of the view that Fed tightening is counterproductive to “make things good again”. He said that viewing interest rate hikes as a cost-effective attempt to regulate rising prices is both “naïve and inconsistent with how the economic machine works”.
The current market situation is expected to stay heated and potentially worsen with further rate hikes as warned by Fed officials. Investors are reorganizing their portfolios to hedge against inflation and also generate profits. Historically, some sectors have appeared to be “winners” in inflationary times. According to research conducted by Hartford Funds, some of the winning sectors during times of surging inflation are Energy, Consumer Staples, Equity REIT, Utilities, and Precious Metals & Mining.
Some prominent gainers from inflation are The Procter & Gamble Company (NYSE:PG), Exxon Mobil Corporation (NYSE:XOM), and The Coca-Cola Company (NYSE:KO).
Photo by Sharon McCutcheon on Unsplash
Our Methodology
To determine the 10 stocks to profit from inflation, we looked for companies that belong to sectors that tend to remain resilient to inflation, and in fact, even go up. We picked stocks that received consensus “Buy” ratings from analysts and ranked them in increasing order of hedge fund holders.
The hedge fund sentiment was derived from Insider Monkey’s Q1 2022 database which tracks roughly 900 elite hedge funds.
Stocks to Profit from Inflation
10. Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 22
Realty Income Corporation (NYSE:O) is a leading equity REIT and has a portfolio of over 11,200 commercial real estate properties that are leased to over 1090 clients under long-term net lease agreements. As of June 23, Realty Income Corporation (NYSE:O) has returned 3.25% to investors over the past twelve months. The company’s returns and dividends have managed to remain resilient to interest rate hikes and high inflation, which is why we included it among the 10 stocks to profit from inflation.
Analysts are bullish on Realty Income Corporation (NYSE:O). On June 22, Credit Suisse analyst Tayo Okusanya initiated coverage of Realty Income Corporation (NYSE:O) with an Outperform rating and a $75 price target. The analyst also named the stock among his Top Picks. The stock is also one of Wells Fargo’s top recession picks.
On June 14, Realty Income Corporation (NYSE:O) raised its monthly dividend by 0.2% to $0.2475 per share, marking the 116th monthly dividend increase since the company went public in 1994. The dividend is payable on July 15 to shareholders of record on July 30.
At the end of Q1 2022, 22 hedge funds disclosed ownership of stakes in Realty Income Corporation (NYSE:O). The total stakes of these hedge funds amounted to $284.88 million.
As of March 31, Glendon Capital Management owns 1.85 million shares of Realty Income Corporation (NYSE:O) and is the top shareholder in the company. The investment covers 8.31% of its Q1 2022 portfolio.
Like The Procter & Gamble Company (NYSE:PG), Exxon Mobil Corporation (NYSE:XOM), and The Coca-Cola Company (NYSE:KO), Realty Income Corporation (NYSE:O) is among the beneficiaries of inflation.
9. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 43
As of June 23, Marathon Petroleum Corporation (NYSE:MPC) has gained 35.76% over the past twelve months, has a forward PE ratio of 5.02, and a dividend yield of 2.60%, which makes it an undervalued dividend-paying inflation stock to profit from.
Analysts are bullish on Marathon Petroleum Corporation (NYSE:MPC). This June, Wells Fargo analyst Roger Read raised his price target on Marathon Petroleum Corporation (NYSE:MPC) to $129 from $117 while maintaining an Overweight rating on the shares. On June 13, BMO Capital analyst Phillip Jungwirth initiated coverage of Marathon Petroleum Corporation (NYSE:MPC) with an Outperform rating and a $135 price target, noting that the company’s shares “still look inexpensive”.
Insider Monkey found 43 hedge funds long Marathon Petroleum Corporation (NYSE:MPC) at the close of Q1 2022. The total stakes of these hedge funds were valued at $2.51 billion. This is compared to 41 positions in the previous quarter with stakes of $2.22 billion. The hedge fund sentiment for the stock is positive.
As of March 31, Elliott Management is the top stakeholder in Marathon Petroleum Corporation (NYSE:MPC) with stakes of $946.05 million.
Clark Street Value mentioned Marathon Petroleum Corporation (NYSE:MPC) in its fourth-quarter 2021 investor letter. Here is what they said:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
8. Barrick Gold Corporation (NYSE:GOLD)
Number of Hedge Fund Holders: 45
Barrick Gold Corporation (NYSE:GOLD) is a stock option for investors looking to maintain their profits during inflation as they can gain access to the commodity through it and investors have traditionally relied on gold during volatile times. This May, Barrick Gold Corporation (NYSE:GOLD) reported its gold production for the first quarter of 2022. The company produced roughly 0.9 million ounces for the quarter. Barrick Gold Corporation (NYSE:GOLD) also announced that it sees its annual gold production for 2022 to range between 4.2 million to 4.6 million ounces.
First Eagle Investment Management is the largest shareholder in Barrick Gold Corporation (NYSE:GOLD) as of Q1 2022. The fund’s stakes in the company were valued at $653.26 million.
Barrick Gold Corporation (NYSE:GOLD) is a dividend payer, another feature that makes it a compelling stock for inflationary times. On May 4, the company doubled its quarterly cash dividend to $0.20 per share, up from its prior dividend of $0.10. The dividend was payable on June 15 to shareholders of record at the close of business on May 27. As of June 23, Barrick Gold Corporation (NYSE:GOLD) has a forward yield of 2.04%.
ClearBridge Investments mentioned Barrick Gold Corporation (NYSE:GOLD) in its recently published first-quarter 2022 investor letter. Here is what the firm said:
“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.”
7. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 50
Consumers will continue to spend on Colgate-Palmolive Company’s (NYSE:CL) products and prefer the company’s premium range of brands over private labels, which is why it is a stock to consider investing in to profit from inflation. Some of the company’s most prominent brands include Colgate, Palmolive, and Tom’s of Maine.
According to Argus analyst, Christopher Graja, Colgate-Palmolive Company (NYSE:CL) is a “Buy” right now. On June 17, Graja reiterated a $90 price target and a Buy rating on the stock, noting that the company is well-positioned to tackle inflation by raising the prices of its consumer staples products, while also cutting costs, thereby improving efficiency. The stock was also named by Wells Fargo as a top recession pick from the consumer staples sector.
Insider Monkey found 50 hedge funds long Colgate-Palmolive Company (NYSE:CL) at the end of Q1 2022 with stakes worth $2.59 billion. This is compared to 48 hedge funds in the preceding quarter with stakes of $2.06 billion. The hedge fund sentiment for the stock is positive
First Eagle Investment Management’s stakes in Colgate-Palmolive Company (NYSE:CL) were valued at $856.63 million at the close of Q1 2022. First Eagle Investment Management is the top shareholder in the company.
Similar to The Procter & Gamble Company (NYSE:PG), Exxon Mobil Corporation (NYSE:XOM), and The Coca-Cola Company (NYSE:KO), Colgate-Palmolive Company (NYSE:CL) is a profitable bet to consider during inflationary times.
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Chevron Corporation (NYSE:CVX) appears to be trading at a bargain right now. As of June 23, the stock has a trailing twelve-month PE ratio of 13.26 and has returned 32.78% to investors over the past twelve months. As mentioned above, the energy sector has historically remained strong even during inflationary periods, which is why it is ranked among the 10 stocks to profit from inflation.
On June 9, Credit Suisse analyst Manav Gupta raised his price target on Chevron Corporation (NYSE:CVX) to $202 from $190 and maintained an Outperform rating on the shares.
At the end of Q1 2022, 53 hedge funds disclosed ownership of stakes in Chevron Corporation (NYSE:CVX). These funds held collective stakes of $27.99 billion in the company, up from $6.50 billion in the preceding quarter with 53 positions.
As of March 31, Warren Buffett’s Berkshire Hathaway is the most bullish hedge fund on Chevron Corporation (NYSE:CVX) with stakes worth $25.91 billion.
ClearBridge Investments mentioned several companies in its “Large Cap Value Strategy” first-quarter 2022 investor letter, one of which was Chevron Corporation (NYSE:CVX). Here is what experts at ClearBridge had to say:
“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. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 61
On June 9, Atlantic Equities analyst Daniela Nedialkova reiterated her $615 price target and Overweight rating on Costco Wholesale Corporation (NASDAQ:COST). As of June 23, Costco Wholesale Corporation (NASDAQ:COST) has gained 21.15% over the past twelve months. Costco Wholesale Corporation (NASDAQ:COST) is one of the beneficiaries of inflation as the big-box retailer can pass on rising costs to consumers, while consumer spending on staples is expected to remain more or less the same.
At the close of Q1 2022, 61 hedge funds were long Costco Wholesale Corporation (NASDAQ:COST) with stakes worth $5.41 billion. This is compared to 57 hedge funds in the previous quarter with stakes of $5.40 billion. The hedge fund sentiment for the stock is positive.
As of Q1 2022, Fisher Asset Management is the most bullish hedge fund investor in Costco Wholesale Corporation (NASDAQ:COST), having stakes worth $2.43 billion.
Here is what ClearBridge Investments had to say about Costco Wholesale Corporation (NASDAQ:COST) in its fourth-quarter 2021 investor letter:
“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.”
4. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
As of June 23, The Coca-Cola Company (NYSE:KO) has gained 14.14% over the past twelve months and has a forward dividend yield of 2.88%. The company has grown its dividends for roughly 6 decades.
On June 21, Morgan Stanley released its list of “top stocks insulated from risk with recession not fully priced in”, in which they mentioned stocks that the bank’s analysts have Overweight ratings on. The Coca-Cola Company (NYSE:KO) was among the bank’s top consumer staples picks.
At the end of Q1 2022, 64 hedge funds were long The Coca-Cola Company (NYSE:KO) with stakes worth $29.17 billion. This is compared to 70 positions in the preceding quarter with stakes worth $28.61 billion.
As of March 31, Berkshire Hathaway owns the majority shares of The Coca-Cola Company (NYSE:KO) which makes it the dominating stakeholder. The fund’s stakes are valued at $24.79 billion.
Here is what ClearBridge Investments had to say about The Coca-Cola Company (NYSE:KO) in its 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.”
3. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 67
As of June 23, Occidental Petroleum Corporation (NYSE:OXY) has climbed 76.72% over the past twelve months and has a PE ratio of 8.39, making it an undervalued energy stock to buy to profit from inflation. This June, Truist analyst Neal Dingmann raised his price target on Occidental Petroleum Corporation (NYSE:OXY) to $93 from $88 and reiterated a Buy rating on the shares.
On May 10, Occidental Petroleum Corporation (NYSE:OXY) announced earnings for the first quarter of fiscal year 2022. The company registered an EPS of $2.12 and beat estimates by $0.09. Moreover, the company’s revenue amounted to $8.53 billion, up 55.74% year over year, ahead of expectations by $473.11 million.
At the close of Q1 2022, 67 hedge funds disclosed ownership of stakes in Occidental Petroleum Corporation (NYSE:OXY). The total value of these stakes amounted to $12.61 billion, up from $3.86 billion in the previous quarter with 58 positions. The hedge fund sentiment for the stock is positive.
As of March 31, Berkshire Hathaway is the top shareholder in Occidental Petroleum Corporation (NYSE:OXY). The fund owns over 136.37 million shares of the company which brings its stakes to $7.73 billion.
Here is what Smead Capital Management had to say about Occidental Petroleum Corporation (NYSE:OXY) in its “Smead Value Fund” third-quarter 2021 investor letter:
“Oil stocks dominated our winners for the quarter. We showed that we have unlimited ability to tempt fate by buying into Occidental Petroleum (OXY) this year after it was our biggest loser of 2020. It gained 16.64% during the third quarter.”
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
Analysts are bullish on The Procter & Gamble Company (NYSE:PG) and the stock is on an upward trajectory, which is why we named it among our stock picks to profit from inflation. As of June 23, The Procter & Gamble Company’s (NYSE:PG) trailing twelve-month returns are up 6.85%. On June 21, Deutsche Bank analyst Steve Powers slashed his price target on The Procter & Gamble Company (NYSE:PG) to $157 from $171 but reiterated a Buy rating on the shares. On June 19, Goldman Sachs released their stock picks for investors looking to take up stakes in stable income companies, and The Procter & Gamble Company (NYSE:PG) was one of them.
At the close of Q1 2022, 72 hedge funds held stakes in The Procter & Gamble Company (NYSE:PG). The total value of these stakes came in at $6.06 billion. This is compared to 67 positions in the previous quarter with stakes worth $6.61 billion.
As of March 31, GQG Partners is the largest stakeholder in The Procter & Gamble Company (NYSE:PG) having stakes of more than $1.51 billion.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation (NYSE:XOM) is one of our top energy stock picks to profit from inflation. As of June 23, the stock has a trailing twelve-month PE ratio of 14.12, a forward dividend yield of 4.01%, and has gained 32.54% over the past twelve months. The stock is trading at a bargain right now, maintaining consistency with growing its dividends, and is climbing, which is why we believe it can be a profitable investment option for investors during the current market situation.
On June 21, Credit Suisse analyst Manav Gupta raised his price target on Exxon Mobil Corporation (NYSE:XOM) to $125 from $115, and upgraded the stock to Outperform from Neutral.
Insider Monkey found 83 hedge funds long Exxon Mobil Corporation (NYSE:XOM) at the end of Q1 2022. The collective stakes of these funds in the company were valued at $8.55 billion. This is compared to 71 hedge funds in the previous quarter with stakes worth $5.38 billion.
GQG Partners is the largest shareholder in Exxon Mobil Corporation (NYSE:XOM) as of the end of Q1 2022. The fund’s stakes in the company were valued at $4.27 billion.
Saturna Capital mentioned Exxon Mobil Corporation (NYSE:XOM) in its fourth-quarter 2021 investor letter. Here is what the firm said:
“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 10 Best Recession Stocks To Buy and 10 Stocks to Buy Before Stagflation Begins.
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Suggested Articles:
- 10 Stocks That are Benefiting From Rising Inflation
- 10 Stocks to Buy Before the Next Recession
- 10 Best Inflation-Proof Stocks
Disclose. None. 10 Stocks to Profit from Inflation is originally published on Insider Monkey.
