Six Stocks that Could Benefit from Higher Inflation

It’s time to look at some recession resistant stocks. Well, in this Bear Market no stock is showing it can be resistant to a downturn, but there are some companies that can pass higher prices on to the consumer, mitigating the effects of inflation.

Here’s six stocks that could do well in the face of higherinflation. Some, like Sherwin Williams (SHW)Ball Corp (BALL), and WW Grainger (GWW) are industrial stocks that can just raise prices. Others names including Dollar General (DG) and O’Reilly Automotive (ORLY) can increase prices while also getting a boost in demand from consusmers looking to cut back on groceries or hold off on buying a new car. Starbucks (SBUX) has raised prices multiple times this year, with no drop off in demand.

Note: we make all our own charts & tables, old school style. The charts are ten-year charts that were updated within the last quarter thus the numbers and stock prices have since changed.

Ball Corp (BALL) is a 142 year old company that management says is recession-resistant as it can pass rising costs of aluminum on to its customers.

Still, the company’s global businesses are absorbing non-aluminum inflation in advance of new contracts, where costs can be recovered. In America, contract escalators are based on PPI and other indices, which continue to be effective.

Dollar General (DG) is a perfect stock to beat hig inflation, as consumers are becoming more price concious as food inflation is runnng around 10% right now.

And DG has the deals on food. Every time I pass one I walk out with bags or groceries ad the prices are much lower than in NYC.

DG is one of my favorite stocks. The company is now rolling out a nwe pOpshelf brand, which carries home items and is geared towards suburban women.

O’Reilly Automotive (ORLY) missed profit estimates recently as people didn’t repair their vehicles as much due to a host of reasons, but most of the problwm was bad weather as do-it-yourselfers often do car repairs in their driveways. 

Still, the high costs of gasoline and new cars will no-doubt cause consumers to cut back on new car purchases. Unless you’re talking about an electronic vehicle like Tesla (TSLA).

Despite having continued strong demand, Sherwin-Williams (SHW) was having trouble getting supplies to make paint.

But around the end of last qtr, raw materials became more available. Investors were impressed with this news and sent the shares higher in anticipation of deflation in raw goods.

Stronger volume is expected in the second half of the year, and if inflation can cool down, SHW can keep its inflated prices, profit growth could return in a big way.

Starbucks (SBUX) has raised prices several times to address inflation. Yes, the company is seeing negligible customer attrition from doing so. SBUX CEO in the latest earnings call said the company is demonstrating elasticity of demand.

SBUX stock has been a long-term winner (prior to this pullback). With sales up 15% during the past qtr, the company continues to grow at a nice rate. If price increases can keep up wth inflation, perhaps profit growth (and maybe the stock) can grow 12-15% too.

Grainger (GWW) stock is flexing its muscles in a tough stock market, for its line of industrial products as customer demand continues to be very strong.

This is another company that can pass price increases on to customers. Gross profit margin increased to 37.9% last qtr from 35.5% a year earlier.

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