Unlike Walmart and Target, these stocks do well when inflation is high
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Some stocks perform better during times of high inflation, despite the fact that rising costs can taint corporate profits and reduce consumer demand. At its highest point in a generation, inflation has reached new highs. This was a nearly 40-year record for the April consumer price index, which rose 8.3% from last year. Two disappointing quarterly reports from large-box retailers this week revealed how inflation affects corporate performance. Target posted Wednesday’s first quarter earnings that were much lower than Wall Street expectations, while Walmart on Tuesday missed Wall Street projections. Both companies blamed higher fuel prices and increasing inventories for consumers’ tightening of discretionary spending. To find stocks to meet the moment, Bank of America looked for S & P 500 companies whose share price performances have historically corresponded with a rise in inflation. In a note to clients earlier in the month, Bank of America shared these findings. Here are 10 of Bank of America’s top pro-inflation stocks. Many of the names in this list include energy and material stocks. These names tend to be able to take advantage of rising commodity prices which rose this year due the disruption caused by the conflict in Ukraine. Occidental Petroleum is the only energy company to be included on Bank of America’s anti-inflationary list. The stock is the best performing in the S & P 500 this year by far, more than doubling in 2022. Warren Buffett’s Berkshire Hathaway favored the oil company, with a 12 billion dollar stake in Occidental at the end the first quarter. Bank of America also screened Mosaic, a fertilizer stock that was a notable performer. Shares are up 67% this year, versus the S & P 500’s 14% decline. Bank of America says Caterpillar has a good record of weathering inflation. With a 3% increase in market share, Caterpillar is outperforming the rest of the machinery and equipment industry. Nucor, Deere and Apple are also included in this screen. Bank of America has also identified an “anti inflation screen” of stocks that suffer from rising inflation. Walmart, Amazon, Best Buy, and Home Depot all appear on the anti-inflation screen. — CNBC’s Michael Bloom contributed reporting.
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