Best Inflation Stocks

Looking at the best inflation stocks? Did you know that in 1970 you’d only need about $.36 to put a gallon of gas in your car? If you wanted to buy a home, you could expect to pay about $23,450.00 — a far cry from the $245,000 you’d probably pay today. But why are things so much more expensive today than they were years ago?

Inflation is a general increase in prices and fall in the purchasing value of money. Inflation is a normal and regular phenomenon — and a smart investor can purchase strategic investments to hedge against it. In this article, we’ll take a look at a few hot stocks that you might want to consider investing in if you’re worried about the effects of inflation on your portfolio. 

Quick Look at the Best Inflation Stocks:

• Dollar Tree
• Coca-Cola
• Nestle
• Preformed Line Products
• Federal Realty Investment Trust

Overview: Inflation Stocks

In economics, inflation is a general decline in the purchasing power of a currency. When purchasing power declines, you need more money to purchase the same amount of products as prices rise.

There are multiple factors that contribute to inflation, including:

• Market power. When a good or sector experiences a restricted supply or a lack of competitive pressures, companies can freely raise prices while maintaining sales levels. This may cause other companies and industries to also raise their prices to keep up with the necessary materials they need to conduct business. For example, if there is an oil shortage, oil companies will increase prices — but any other company that relies on oil for transportation may also need to pass these prices onto the consumer causing a ripple effect.
• Demand-pull inflation. Inflation doesn’t only result from periods of economic uncertainty — it can also be the result of overspending as well. When unemployment rates are low and consumer confidence is high, demand for particular products may increase. With a less abundant supply and more demand, prices increase. Economic expansion can lead to a permanent rise in prices even after market bursts have ended.

While inflation is typically not a positive for stocks, certain sectors may benefit from inflation. Many consumer goods stocks are efficient at keeping up with inflation as their underlying companies pass price increases along to customers. Some alternative assets even qualify as “inflation hedges” — an investment that protects the value of your money during inflationary periods. 

Best Online Brokers for Inflation Stocks

From purchasing shares of thousand-dollar tech companies to hunting for stocks under $5 for day trading, becoming an investor begins with opening a brokerage account. If you don’t already have a brokerage account, consider a few of our top choices below. 

Features to Look for in an Inflation Stock

Though many stocks perform exceptionally well during inflationary periods, not every company is equipped to rise in value as the value of the dollar decreases. Look for these 3 essential characteristics before investing in a company for inflation protection:

• Backed by an underlying asset. Assets (like real estate) and commodities tend to act as hedges against inflation. If you can’t purchase these assets directly, you might want to consider investing in a stock based in an inflation-resistant asset — for example, a real estate investment trust (REIT) or precious metal mining company.
• Can pass inflated costs back to consumers. The retail sector tends to do exceptionally well during inflationary periods because these companies can easily pass along the increased cost of materials to the consumer through price increases. This results in a higher earnings per share value for the company — and in many cases, an increase in value.
• Favor growth over dividends. Though many investors are attracted to dividend stocks for the income they provide, these investments tend to do poorly during a period of high inflation. Instead of searching for the highest dividend yields, consider investing in a solid growth stock in an inflation-resistant industry like oil, healthcare, food or technology. 

Protect Yourself Against Inflation

Many consumers assume that inflation is entirely negative because they’re looking at inflation from the perspective of someone whose dollar doesn’t buy as many groceries, healthcare needs and other daily necessities. 

However, in the context of investing, diligent investors with an eye towards the future can attempt to protect themselves and increase profits by choosing inflation-resistant industries. 

No matter if you’re interested in high-value technology companies or you’re on the hunt for stocks under $20 or stocks under $10 that will increase in value over time, doing your research is essential before you place a buy order. 

Frequently Asked Questions