Inflation returns are a blow to the bond market but could also be a boost for the stock market. To take advantage of this trend, you might consider reallocating 10% of your portfolio to equities.
Another option is to buy preferred stocks. These liquid bonds will yield a higher yield than other types of bonds, and they may not fall in price as quickly as bonds when inflation occurs.
Utility stocks are the third option. They pay steady dividends and the price of the stock can rise and fall in an economically predictable manner. Equities can be considered an inflation hedge since a company can charge more for its products and services to offset rising input costs.
These stocks are recommended by analysts as good investments in an inflationary climate.
To kick off 2022, the stock market experienced its first quarter of decline in two years. This was due to high inflation pressures on American customers. In February, the consumer price index saw a 7.9% increase year-over-year. This is its biggest gain since 1982. Bank of America recently created a pro-inflation stock screening to identify stocks with a strong positive correlation to inflation. These seven inflation investments are for investors who want to protect their portfolios.
Baker Hughes Co.
Baker Hughes is an oilfield services company that supplies equipment and technology to the oil-and-gas industry. Analyst Doug Leggate believes that General Electric Co. ( GE ) should sell its remaining stakes in Baker Hughes. Management will then return between 60%-80% of the free cash flow to BKR shareholders. Baker Hughes has the best historical correlation to inflation of any stock Bank of America tracks. Baker Hughes’ over 50% gain year-to-date in 2022 is a strong indicator that this correlation is still alive. Bank of America rates BKR stock as a buy and has set a $44 price target. The stock closed at $37.52 on April 8.
BorgWarner supplies components and drivetrain systems to the automotive industry. John Murphy, an analyst, is positive about BorgWarner’s Charging Forward initiative. This includes goals like $2.5 billion in electric vehicle organic sales by 2025 and $2 billion in mergers & acquisitions by 2025. The global auto industry has been disrupted by supply chain issues. Murphy claims that BorgWarner’s 7% revenue decline in the fourth quarter was much better than the 15% drop in global auto production. Bank of America rates BWA stock a “buy” rating with a $65 price target. The stock closed at $36.41 on April 8th.
Newmont is the largest producer of gold in the world, with the gold price increasing 6.8% by 2022. Newmont shares have increased 31% in the past year, thanks to gold being a classic inflation hedge. Michael Jalonen, the analyst at Newmont, says that management is prioritizing the right goals. These include reinvesting into the business, maintaining strong balance sheets, and returning capital to shareholders. Management at Newmont has stated that it expects production to increase each quarter and costs to remain stable through the end. Bank of America gave NEM stock a “buy” rating with a $75 price target. The stock closed at $82.12 on April 8.
Corning manufactures glass substrates for the electronics industry as well as fibre optic equipment for the telecommunications sector. An analyst says that the pricing environment for glass is favourable and that Corning should see price increases as a way to increase its margins. In the coming quarters, 5G upgrades will also be a factor in driving demand. The analyst believes Corning’s scratch- and damage-resistant Gorilla Glass, as well as the increasing number of smartphones and auto content, will be positive catalysts for the stock. The analyst believes that Corning will benefit from the shift to larger-screen TVs, and computer displays. Bank of America has given a “buy” rating to GLW stock and a $48 price target. GLW stock closed at $34.09 on April 8th.
American Tower Corp.
American Tower, a specialized investment trust or REIT that manages the largest global network of broadcast towers and wireless communications, is a real-estate trust. Analyst David Barden claims that the tower business is stable and consistent and generates steady revenue growth, as wireless networks expand and global subscribers grow. Barden states that AMT tower stock is the most conservative and least leveraged. AMT plans to build another 4,000 towers, in India, and 1,900 in Africa in 2022. AMT stock closed at $266.41 on April 8th. Bank of America gave a “buy” rating to the stock and set a $315 price target.