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Best Stocks for Inflation – 4 Companies to Beat the Market

Key economic indicators are hitting levels not seen since 2008. Check out the best stocks for inflation so your portfolio can prepare for what’s to come.
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Lately, there’s been a lot of talk about the best stocks for inflation as key economic indicators are hitting levels not seen since 2008. While this may be true, the stock market is still making new highs every day. What gives?

Well, for one, the Federal Reserve is still using several of its tools to support the economy. But, this may be changing soon, with the FED saying it’s slowing the purchase of assets starting later this month.

Not only that but with inflation levels hitting a 13 year high, investors are beginning to question whether interest rates will be raised sooner rather than later. Seeing that the U.S yield curve is flattening, expectations are starting to reveal themselves.

Will the FED have the tools it needs to address the rising concerns? Sooner or later, they will need to make a decision.

In the meantime, keep reading to find the best stocks for inflation so your portfolio can prepare for what’s to come.

The Best Stocks for Inflation – “Toll Bridge Businesses”

Warren Buffett has seen it all. He’s been through several recessions, inflationary periods and has still managed over 16% annual growth.

His advice, “In an inflationary world, a toll bridge would be a great thing to own because you’ve laid out the capital costs.” That is to say, companies who have already established themselves in their market and their profits will be (relatively) unchanged given economic conditions.

Best Oil & Gas Stocks: No. 4 Pioneer Natural Resources (NYSE: PXD)

  • Market Cap: 44.29B
  • Industry: Oil & Gas
  • “Toll Bridge” Advantage: “Best in class” breakeven price supported by solid investments.

It’s no secret gas prices are on the rise. Part of the reason why gas prices are soaring is because of the cost of crude oil, which rose above $85 a barrel just this past month. And oil prices are higher on the disrupted supply/demand brought about by the pandemic.

Although nobody likes paying more for gas, oil companies like Pioneer see higher profit margins. As a result of higher margins over the past year, the company is using the additional cash to improve its business.

With Pioneer’s buying of Doublepoint Energy and Parsley Energy, the company is now the largest producer in the Permian. The move allows the company to generate more, for a lower cost.

Not only that, but Pioneer is also rewarding shareholders with a massive variable dividend of $1.51/ share, on top of the $0.56 base.

Looking ahead, Pioneer is in a strong position in the oil market. With profitable margins and a best-in-class breakeven point, Pioneer will be one of the best stocks for inflation as we advance.

Best Bank Stocks: No. 3 JPMorgan Chase (NYSE: JPM)

  • Market Cap: 481.92B
  • Industry: Banks
  • “Toll Bridge” Advantage: Largest bank in the U.S. by AUM.

As I have noted earlier in the article, the U.S yield curve looks to be flattening. The action tends to result from investors expecting interest rates to rise sooner than what the FED is hinting at.

For this reason, banks are some of the best stocks for inflation as rate hikes are generally in store. And what better bank to own than JPMorgan, the largest in the U.S?

On top of this, with consumer prices hitting multi-year highs, JPMorgan will likely benefit from extra credit card & loan purchases.

CEO Jamie Dimon had this to say about the MRQ:

“We are making important investments, including strategic, add-on acquisitions that will drive our firm’s future prospects and position it to grow for decades.”

The biggest bank in the U.S. is outperforming its peers, with net income advancing 24% in Q3 to $11.7 billion. Or, in other words, $3.74 earnings per share.

Best Consumer Brands: No. 2 Nike (NYSE: NKE)

  • Market Cap: 269.92B
  • Industry: Consumer Goods
  • “Toll Bridge” Advantage: Massive moat with enormous brand power.

Typically, you would want to avoid consumer goods brands during times of inflation with materials costs rising. However, Nike is not an average company by any means. Believe it or not, Nike’s stock has performed well historically during times of inflation.

The fan-favorite brand is continuously improving its financials with widening margins and impressive revenue growth.

Furthermore, the corporation is now turning to direct consumer sales, which will increase Nike’s profit margins even higher. In Nike’s latest earnings, direct sales increased 28% to $4.7 billion.

Nike’s consumer engagement will continue to benefit the corporation in the future. The company’s strong moat will allow it to expand its market share. Given these considerations, Nike is one of the best stocks for inflation that has proven worthy in the past.

Best Stocks for Inflation – No. 1 Microsoft (Nasdaq: MSFT)

  • Market Cap: 2.56T
  • Industry: Software
  • “Toll Bridge” Advantage: Superior product portfolio & increased reliance on technology.

Another popular move for investors hoping to avoid the wrath of inflation is big tech. And now, the biggest of the big tech, Microsoft, has recently become the world’s most valuable firm. The tech company has been able to accomplish this through a brilliant portfolio of innovative products.

Microsoft’s latest quarterly earnings were a big one for the company. It saw growth in several key areas, with total revenue growing 22%. In particular, much of the increase comes from Microsoft’s cloud unit up 31% in the quarter.

In addition, other areas of growth to note:

  • LinkedIn revenue +42% – Driven by growth in marketing & advertisements.
  • Office Commercial Products + 18% – As a result of Office 365 growth.
  • Search & News +40% – Driven by increased advertising income.

As you can see, Microsoft is deservingly the most valuable company in the world right now. Its unmatched growth over the past few years, combined with its relentless product expansion, gives it the top spot on the best stocks for inflation list.

Is Now the Time to Start Buying the Best Stocks for Inflation?

Now that the economy is getting back on track, the FED is announcing it will be slowing the purchasing of assets. A move that indicates the FED is beginning to take off the training wheels in terms of economic support. The announcement comes as consumer inflation is picking up in things like food.

With that in mind, these are some of the best stocks for inflation that can help keep your portfolio in the green while economic conditions are changing.

Learn more about the top stocks on the market and how to stay ahead of the latest trends by signing up for the Profit Trends e-letter below. By entering your email, you can gain insight from top experts on the markets hottest trends. Check it out below!

These companies are great examples of “toll bridge businesses” that have already laid the foundation and are reaping the rewards. They have established themselves as market leaders and do everything they can to create a favorable situation for investors.

The post Best Stocks for Inflation – 4 Companies to Beat the Market appeared first on Investment U.

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Economics

FT-IGM US Macroeconomists Survey for December

The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results. For GDP, assuming Q4 is as predicted in the November Survey of Professional…

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The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results.

For GDP, assuming Q4 is as predicted in the November Survey of Professional Forecasters, we have the following picture.

Figure 1: GDP (black), potential GDP (gray), November Survey of Professional Forecasters (red), November SPF subtracting 1.5ppts in Q1, 05ppts in Q2 (blue), FT-IGM December survey (sky blue squares), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

In the figure above, I’ve used the SPF forecast of 4.6% SAAR in 2021Q4; the Atlanta Fed’s nowcast as of yesterday (12/7) was 8.6% SAAR. A new nowcast comes out tomorrow.

Interestingly, q4/q4 median forecasted growth equals that implied by the Survey of Professional Forecasters November survey (which was taken nearly a month before news of the omicron variant came out).

The q4/q4 forecast distribution for 2022 is skewed, with the 90th percentile at 5% growth, the 10th percentile at 2.5%, and median at 3.5%. I show the corresponding implied levels of GDP (once again assuming 2021Q4 growth equals the SPF ).

Figure 2: GDP (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue squares), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

On unemployment, the median forecast is for a deceleration in recovery,

Figure 3: Unemployment rate (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue square), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle). NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

The survey respondents also think that the participation rate will take a long time to return to pre-pandemic levels.

Source: FT-IGM, December 2021 survey.

On inflation, the median is higher than the November SPF mean estimate for 2022 of 2.3% (and Goldman Sachs’ current estimate).

Source: FT-IGM, December 2021 survey.

The entire survey results are here.

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Government

Over 170 companies delisted from major U.S. stock exchanges in 12 months

  Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies….

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Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies.

According to data acquired by Finbold, a total of 179 companies have been delisted from the major United States exchanges between 2020 and 2021. In 2021, the number of companies on Nasdaq and the New York Stock Exchange (NYSE) stands at 6,000, dropping 2.89% from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

NYSE recorded the highest delisting with companies on the platform, dropping 15.28% year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86% from 3,306 to 3,566. Data on the number of listed companies on NASDAQ and NYSE is provided by The World Federation of Exchanges.

The delisting of the companies is potentially guided by basic factors such as violating listing regulations and failing to meet minimum financial standards like the inability to maintain a minimum share price, financial ratios, and sales levels. Additionally, some companies might opt for voluntary delisting motivated by the desire to trade on other exchanges.

Furthermore, the delisting on U.S. major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by U.S. equity markets. As per a previous report, the U.S. controls 56% of the global stock market value.

A significant portion of the delisted companies also stems from the regulatory perspective pitting U.S. agencies and their Chinese counterparts. For instance, China Mobile Ltd, China Unicom, and China Telecom Corp announced their delisting from NYSE, citing investment restrictions dating from 2020.

Worth noting is that the delisting of firms was initiated due to strict measures put in place by the Trump administration. The current administration has left the regulations in place while proposing additional regulations. For instance, a recent regulation update by the Securities Exchange Commission requiring US-listed Chinese companies to disclose their ownership structure has led to the exit of cab-hailing company Didi from the NYSE.

Impact of pandemic on the listing of companies

The delisting also comes in the wake of the Covid-19 pandemic that resulted in economic turmoil. With the shutdown of the economy, most companies entered into bankruptcies as the stock market crashed to historical lows.

Lower stock prices translate to less wealth for businesses, pension funds, and individual investors, and listed companies could not get the much-needed funding for their normal operations.

At the same time, the focus on more companies going public over the last year can be highlighted by firms on the Nasdaq exchange. Worth noting is that in 2020, there was tremendous growth in special purpose acquisition companies (SPACs), mainly driven by the impact of the coronavirus pandemic. With the uncertainty of raising money through the traditional means, SPACs found a perfect role to inject more funds into capital-starving companies to go public.

From the data, foreign companies listing in the United States have grown steadily, with the business aiming to leverage the benefits of operating in the country. Notably, listing on U.S. exchanges guarantees companies liquidity and high potential to raise capital. Furthermore, listing on either NYSE or Nasdaq comes with the needed credibility to attract more investors. The companies are generally viewed as a home for established, respected, and successful global companies.

In general, over the past year, factors like the pandemic have altered the face of stock exchanges to some point threatening the continued dominance of major U.S. exchanges. Tensions between the US and China are contributing to the crisis which will eventually impact the number of listed companies.

 

Courtesy of Finbold.

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Economics

Stock futures open flat as Omicron concerns ease

Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%…
The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%

Stock futures opened relatively flat on Wednesday evening, though sustaining gains posted by a three-day recovery rally that was led by cooled investor concerns around the Omicron variant of the coronavirus.

Dow futures edged up 0.02%, while contracts on the tech-focused Nasdaq Composite inched up 0.10%. All major indexes closed up, with the S&P 500 adding 14.46 points to end the session at 4,701.21, just 0.5% short of the trading session on Nov. 24, a day before the latest COVID-19 variant was announced by the World Health Organization (WHO).

The moves were supported by eased virus fears after Pfizer Inc. and BioNTech reported that early lab studies show a third dose of their coronavirus vaccine mitigates the Omicron variant.

The vaccine makers had indicated the initial two doses may not be enough to protect against infection from Omicron. Shares of Pfizer (PFE) traded 0.62% lower on Wednesday, closing at $51.40.

With virus concerns diminishing, investors are pivoting their attention back to economic data, awaiting Consumer Price Index (CPI) figures on Friday to assess the extent inflationary pressures will persist.

If the Omicron variant was to lead to a resurgence in goods spending at the expense of services or to further complicate supply disruptions, there could be a clear inflationary impact, too, HSBC economist James Pomeroy wrote earlier this week in a research note to clients.

He stated: The inflation news in the past few weeks has been decidedly mixed — with upside surprises in both the U.S. and eurozone being offset by the possibility of some of the supply chain issues starting to alleviate, while energy prices have fallen sharply in recent days.

The post Stock futures open flat as Omicron concerns ease first appeared on Trading and Investment News.

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