Best Companies to Invest In

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Inflation and rising interest rates will be the big storylines in markets as the calendar pages turn. With the Federal Reserve set to continue its schedule of rate hikes to combat 40-year high inflation, stocks will remain in the crosshairs — especially unprofitable companies that could find their funding sources running dry. So how should investors respond for the rest of the year? Here are the best companies you might consider investing in.

Best Companies to Invest In

What companies are most appealing in inflationary environments with rising interest rates? When inflation is high, companies that can maintain pricing power tend to outperform — like those in the consumer staples, energy and utilities sectors — are considered to be the best bet. Here are top companies that could do better than the overall stock market when high inflation and soaring interest rates are in focus.

1. Tyson Foods Inc. (NYSE: TSN)

Tyson Foods is known for its chicken, but it produces all kinds of beef, pork and poultry products through its various subdivisions. Tyson sells its meat and prepared foods to retailers like grocery stores and wholesale markets, commercial restaurants, international exporters and food service companies operating cafeterias, hospitals and military commissaries. Tyson has roots in many different industries and can pass elevated commodity costs onto customers with minimal pushback.

Tyson was founded in 1935 and currently boasts a hefty market capitalization of $25 billion. The dividend yield on shares is 2.56%, and the stock has a low 6.43 price-to-earnings (P/E) ratio. The company increased its revenue growth rate and gross profits annually for the last four years. Few sectors in the stock market are better prepared for high inflation than food producers, and Tyson’s stock has been less volatile than most over the last few years. Besides, are Americans really going to say no to chicken wing price increases during football season? Seems unlikely.

2. Enphase Energy Inc. (NASDAQ: ENPH)

Energy prices were tumultuous in 2022 thanks to several factors, and even though oil prices have receded a bit, cheap efficient energy looks to be a big investing theme moving forward. Investing in solar companies has been risky, but tiny Enphase Energy out in California has shown tremendous resilience compared to its peers. An investment firm or hedge fund may consider it to be a good value company.

Enphase Energy specializes in solar solutions for American and international clients. Enphase sells products to homeowners and businesses, plus installers, solar distributors and original equipment manufacturers. The company has increased its revenue growth rate and profit each year since 2018 and has beaten earnings expectations for four consecutive quarters. The stock has a market capitalization of $42 billion, but a beta of 1.49 makes it one of the more volatile entries on this list.

3. Home Depot Inc. (NYSE: HD)

Home remodeling giant Home Depot has over 2,300 stores in the United States, primarily servicing homeowners, contractors and trade professionals, making it one of the best companies to invest in. The company sells everything from hardwood to paint to fixtures and plumbing supplies and employs nearly half a million people across its businesses. The company’s stock has a market capitalization of over $280 billion, and shares pay a dividend yield of 2.71%. With a PE ratio of 16.84, the stock is cheap to own, and the company has produced higher profits and more free cash flow than competitors like Lowe’s Companies Inc. (NYSE: LOW).

Home Depot could be one of the biggest beneficiaries of the current market environment as mortgage rates ramp up to decade-long highs. With rates at 5% to 6%, homeowners who locked mortgages at 3% to 4% will be less motivated to sell their homes and increase their monthly housing costs. But upgrading or remodeling will be an option, especially if housing price appreciation has left them with plenty of newfound equity in their homes.

BJ’s and Costco Wholesale Corp. (NASDAQ: COST) are the two main competitors in the wholesale club industry and while Costco is the bigger name, BJ’s Wholesale Club Holdings might be the better stock to buy. BJ’s is smaller than Costco, with 229 warehouse clubs and 160 gas locations spread across the eastern part of the United States. The company sells perishable products and other merchandise in bulk, mainly under their personal Berkley Jensen and Wellesley Farms brands. It is considered a solid growth company for beginner investors, with high revenue growth.

BJ’s has beaten earnings estimates for four straight quarters and continues to see annual revenue growth and profits. BJ’s stock also carries a $10 billion market capitalization and a 21.67 P/E ratio, which is more than 40% lower than COST’s P/E ratio.

Who doesn’t use products from Procter & Gamble? The household and consumer products giant owns many popular brands like Gillette, Olay, Old Spice, Downy, Mr. Clean, Pampers, Charmin, Metamucil and Pepto-Bismol. There’s a good chance that every trip you make to the grocery store ends with some kind of Procter & Gamble product in your cart. And since so many of these household products are necessities, the company has a lot of pricing power control over its distributors.Procter & Gamble was founded nearly 200 years ago and is one of the oldest companies in the S&P 500. It’s also one of the least volatile, with a beta of 0.35 and a massive $300 billion market cap. PG is an excellent dividend stock that pays a dividend of 2.66% and has a modest 23.36 P/E ratio. Investing in consumer defensive stocks like PG won’t necessarily make your portfolio skyrocket, but they can be a good bet to preserve purchasing power during inflationary periods or bear markets.

6. Advanced Micro Devices Inc. (NASDAQ: AMD)

AMD is a semiconductor company that specializes in Data Center, Client, Gaming and Embedded sectors. It offers CPUs, GPUs, DPUs, FPGAs and SoCs to meet multitasking and gaming requirements. In the past year, the stock has traded between $109.57 and $54.57, but it stands at $101 in early June 2023. According to analysts, AMD may reach $120 in the coming year.

AMD has shown consistent stock value growth since going public, indicating its ability to provide favorable returns for investors over time. The company boasts a significant market capitalization of over $165 billion, indicating strong profitability, which is further supported by its impressive P/E ratio of 441.22 and forward P/E ratio of 43.70.

AMD's financial indicators and technological expertise make it a strong investment choice. The company offers high-performance CPUs, GPUs and other semiconductor solutions, which have secured its position in important markets such as gaming consoles like Sony PlayStation Pro 4 and Microsoft Xbox One S. After taking into account various factors such as stock performance, earnings potential, market capitalization and technological advancements, it can be concluded that AMD may present a favorable investment opportunity in the semiconductor sector of the technology market industry.

7. Visa Inc. (NYSE: V)

Visa and Mastercard hold a dominant position in the global credit and debit card market because of network effects and incentives. Merchants widely accept both cards, and consumers heavily rely on them, leading to a mutually beneficial relationship.

Visa avoids credit risk by facilitating transactions. This focus on transactions mitigates financial liabilities, making it stable for investors. Issuing banks earn a large portion of fees, ranging from 50% to 90%. These fees allow banks to offer appealing rewards programs to consumers, which enhances customer loyalty and strengthens Visa's market presence.

Visa's market price is $230 in June 2023, with a 52-week range of $174.60 to $235.57. The company's average volume of 6,241,175 shares indicates steady investor interest and liquidity. Furthermore, Visa's market capitalization is $488.54 billion, cementing its status as a prominent player in the payment processing sector.

Visa's investment potential is promising because of its alignment with the shift toward digital payments and its established brand. The company's infrastructure and commitment to innovation make it well-positioned to meet the demand for secure payment solutions. Its P/E ratio of 31.18 and EPS of 7.48 indicate a favorable valuation and solid earnings performance.

8. Etsy Inc. (NASDAQ: ETSY)

Etsy has shown strong growth despite recent challenges and has outperformed the broader e-commerce sector. Its price is $92.65 in early June 2023 with a 52-week range of $67.01 to $149.91, offering potential opportunities for investors to consider.

Etsy experienced significant growth during the pandemic because its platform was a natural fit for unique face masks and other distinctive products. Its success was not limited to this category, as growth was seen across all product segments. In the fourth quarter of 2022, Etsy's marketplace sales volume increased by 144% compared to pre-pandemic levels, demonstrating its resilience and market appeal.

In the e-commerce industry, Etsy stands out as a powerful platform. Despite competition from Amazon's handmade items platform, Etsy has been successful in attracting customers looking for unique and specialized products. This factor demonstrates Etsy's strength in the market.

The current decrease in stock value during the growth stock downturn of 2023 may provide an excellent opportunity for long-term investors seeking value.

Investors who are patient may find potential in Etsy's stock as it expands its reach and takes advantage of market opportunities.

Should You Hold or Sell New Stocks?

Do you want to be an active trader or a buy-and-hold investor? Choosing between these distinctions will impact how long you hold a stock in your portfolio. There’s no right or wrong answer, although one avenue takes more time and energy to get right. Stock market data points coupled with how often you want to be trading can help inform your decision.

Buy-and-hold stock investing is the backbone of many retirement plans and investment accounts, so it makes sense when considering the types of stocks on this list. Buy-and-hold investors have timeframes that measure in years or decades and can withstand bouts of volatility. Buy-and-hold investors usually buy blue-chip companies or broad index funds to capture the market's gains without taking on too much risk.

Active traders will buy and sell stocks in short timeframes, looking for incremental profits that add up day after day. Traders who buy and sell new stocks don’t rely on economic data or company earnings reports but on stock chart patterns and trend-following signals. Knowledge of technical analysis is buying and selling stocks with short time horizons and paying close attention to historical stock price levels. Technical analysis is a method of active trading that is used by many hedge funds and investment companies worldwide.

Benefits of Investing in Company Stocks

While not every year in the market is a good one, investing in stocks over the long term is usually a productive use of capital. A robust stock portfolio has many benefits, including:

Purchasing Power Protection

Inflation doesn’t typically run at 8% per year, but a moderate amount of inflation can usually be assumed to occur. The Federal Reserve’s target goal is 2%, which means purchasing power will decay over time if cash is stuffed under the mattress or in low-interest savings accounts. Putting money in stocks with real market value can preserve the purchasing power of capital over time if markets go higher (as they usually do over multi-decade timeframes).

Share Price Appreciation

A diverse stock portfolio will prevent your capital from suffering from too much individual stock risk, but a few big winners in a portfolio can cause the account's value to appreciate exponentially. Investors who bought and held stocks like Amazon, Google and NVIDIA over the last decade were handsomely rewarded for their patience.

Beneficial Tax Considerations

Profits on stocks held longer than one year in a brokerage account will be taxed at the long-term capital gains rate, which is much friendlier to taxpayers than the ordinary income rate. Additionally, investors holding stocks and index funds in tax-advantaged accounts like 401(k) plans or IRAs can defer taxes until retirement. Or, in the case of a Roth IRA, taxpayers fund the account with after-tax dollars and pay no taxes on investment gains in retirement.

Navigating the Market Landscape

Amid inflation and rising interest rates, some companies are good investment options, including Tyson Foods, Enphase Energy, Home Depot, BJ's Wholesale Club Holdings, Procter & Gamble, Visa, AMD and Etsy. These companies are resilient and profitable and can maintain pricing power during inflationary periods. Investors should assess their investment goals and risk tolerance before making decisions.

Frequently Asked Questions

Best Companies to Invest Methodology

Benzinga analyzed market trends, industry performance, financial indicators and company-specific characteristics to determine the best companies to invest in. It assesses current market conditions and considers criteria such as pricing power, industry focus, revenue growth, market capitalization, dividend yield and stock volatility. 

Extensive research and analysis of expert opinions have contributed to selecting these options as the best companies to invest in right now. Conduct further research and consider individual investment goals and risk tolerance before making investment decisions.