Best stocks for inflation 2022: Best Inflation-Proof Investments for 2023 The Motley Fool

Both rerouted the market’s playing field in 2022’s first quarter. The aggravation of lingering supply chain issues then combined in a tsunami, unleashing the biggest inflation outbreak in four decades. That forced many investors to make big changes to their portfolios. But there have been some sectors doing well despite the mass market downfall. They’re rising because of inflation and the current geopolitical situation’s effect on supply chains. “If you’re someone who has some exposure to alternative investments … that have low correlation to the stock market, that’s helpful,” says Moore.

Using this list, you can decide which are the best fit for your particular goals and risk tolerance and help protect your portfolio from the effects of rising consumer prices. Elevated inflation can certainly be a negative for bank stocks since it can lead to lower demand for loans and an uptick in consumer defaults. Inflation usually leads to rising interest rates (as we’ve seen over the past year or so), leading to higher profits for banks.

According to S&P Global Market Intelligence, Wall Street pros currently have 25 Strong Buy and Buy ratings on FANG shares, versus just three Holds and one Sell. And their $172.21 consensus price target gives the stock implied upside of nearly 20% from current prices. And just like funds make it easy to invest in oil, they make it easy to invest in a broad basket of commodities. As a result, most investors need iron stomachs and deep pocketbooks to play these issues successfully over the long-term. Occidental Petroleum made it into the top 10, grinding out more than 117% upside.

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NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Consumers tend to cut back on discretionary spending during uncertain times, including periods of high inflation. But companies that sell things that people need have the ability to pass cost increases along to their customers without having much of an effect on sales. Oil prices were way up from 2021, but, at the current moment, are under the influence of seasonal demand patterns.

It has since rebounded to trade near $25, but sentiment remains negative. However, this is less evident in the third-quarter numbers reported at the beginning of November. Sales of $5.4 billion and earnings per share of $2.89 were slightly negative from the second quarter, but way ahead of the third quarter a year ago. In that comparison, revenues were 54% higher and earnings per share were up 133%.

They’re strong, fundamentally-sound stocks that pay dividends and are set up for success in inflationary environments. Shares of CF Industries have risen to be sure, up nearly 18% year-over-year. Still, if stocks are valued by a multiple of earnings, an 18% increase in the share price when compared to the 1,200% increase in earnings might be construed as a mismatch.

Stocks with great balance sheets

PE ratios had positive returns in 2022, while the S&P 500 fell more than 15%. “The income portion is usually more consistent than the market fluctuations,” Moore says. She is a thought leader in content diversity, equity and inclusion, and finds ways to make every piece of content conversational and accessible to all.

These are likely to be among the more volatile stocks out of the investment strategies on the list, but the point is that these businesses can be big inflation beneficiaries. On the other hand, you don’t see the same price fluctuations in short-term bonds. As of January 2023, the two-year Treasury yield is about 4.8%, and if interest rates were to rise even further, it wouldn’t have much of an effect on your bond since it’s already so close to maturing. However, rental properties can be an excellent way to build wealth over time and can protect against inflation. Historically, home prices as well as rental rates have kept pace with inflation — or slightly more — over long periods of time. In fact, rising home prices have been one of the main drivers of the inflation we’ve been seeing.

The value of your bonds would rise by $100, and thus the purchasing power of your original investment would remain the same. The interest on the bonds is based on the adjusted principle, too, so the interest rate will change over time – and it’s possible, depending on the inflationary environment, for yields to even turn negative. But they should still be tactical – certain parts of the stock market tend to fare better than others during periods of rising consumer prices. The Russia-Ukraine war put a fire under commodities in the first and second quarters, lifting crude oil and natural gas to multiyear highs. The inflation shock hit growth stocks and Big Tech like a sledgehammer, triggering a sizable rotation into value and defense by big investors. ADM, MOS, CTVA, EOG, and JNJ represent the best stocks to battle inflation for May 2022.

Diamondback Energy is an independent energy exploration and production stock that deals with oil and natural gas, operating primarily in the Permian Basin in West Texas. Oil isn’t alone – many commodities also enjoy a boost during periods of accelerating consumer prices. Sierra Wireless offered another outstanding tech play, up 65%.

The Internet of Things provider traded near an all-time high, after a steady streak of double-digit percentage quarterly earnings and sales growth. Super Micro Computer was the tech sector’s top 2022 performer, boasting an 87% return. The server and storage provider crushed the competition, more than doubling its 2021 profit to $5.65 per share.

The stock continues to find support at its 10-week moving average. Asato says the energy sector is a good place to look for inflation-resistant stocks. “Let’s say inflation is at 6%, and your investments are only making 4% — you’re still losing money,” says Moore.

Alexandria Real Estate Equities

We believe everyone should be able to make financial decisions with confidence. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. Let’s say that you bought a 30-year Treasury bond paying 2.5% interest a couple of years ago.

The stock soared in November after reporting strong results in the late-stage trial of an Alzheimer’s disease treatment. It also boasts an emerging pipeline of compounds for central nervous system disorders, depression and narcolepsy. It broke out of a base Nov. 28 and reached a 20% profit target. Appalachian coal miner Consol Energy took a top-five spot on the 100 Best Companies list, gaining more than 180%.

Meanwhile, demand for fertilizers is up due to the planting of additional acreage amid rising crop prices. With that in mind, here are five of the best inflation-proof stocks. We wrote about the stocks below as good inflation hedges back in August, and here we check in on them again. The companies have continued to perform well, even if in some instances the stocks have not. Still, buy-and-hold investors, particularly those who believe inflation is with us for the long term, might look more closely at these picks. While this roughly 100-holding portfolio is designed to be inflation-proof, it’s a diversified enough fund that it should have a shot at performing well even if consumer prices stagnate.

Inflation-protected bond funds use trading strategies to target returns that are at least equal to the inflation rate. Dividend stocks also give investors a portion of a company’s earnings on a regular basis. There’s a fixed interest rate that stays constant over time and an inflation-based component that changes every six months. I bonds issued from November 2022 through April 2023 have a fixed rate of 0.40% and an inflation adjustment of 6.49%, for a total initial yield of 6.89%.

This can include energy companies, precious metal miners, steelmakers, and other industries. Rising inflation is typically anathema to bonds, but a couple of fixed-income investments can actually remain strong in the face of rising prices. “In an inflation-protected bond portfolio, for example, the fund managers are buying and selling bonds based on current inflation rates, to basically keep up with the inflation rate. So they’re actively managing it to attack that problem,” Moore says. Moore says investors should also consider income-producing investments such as real estate or dividend stocks. The investing information provided on this page is for educational purposes only.

But if your goal is to prevent inflation from destroying your purchasing power, I bonds can be a smart choice. Investors can reasonably infer that Devon management remains bullish about the future. In November, the company increased its quarterly payout to $1.35 per share, or 60%, bringing the dividend yield to approximately 9%.

To wit, the dividend payment is broken up into fixed and variable components, with the latter dependent on cash flows in any given quarter. As the fixed component for 2022 so far has been about 13% of the total, the other 87% of the dividend could evaporate should things turn sour in the oil patch. Inflation has been top of mind for investors over the past year.