Although it’s not a hard-and-fast rule, former presidents deliberately step away from the limelight after their time in office comes to an end. A major contributing factor for this behavior is to allow the next administration to move ahead with its agenda without unnecessary distractions. Well, former President Donald J. Trump has other ideas, which brings up an intriguing (albeit speculative) opportunity for stocks to buy.
Playing coy with his intentions regarding the 2024 election, it certainly seems “The Donald” will have another go in 2024. I laughed when a Washington Post op-ed described Trump as a horror movie villain threatening to rise again. Fortunately for Democrats, this won’t be like the Friday the 13th series, as there are things called term limits. However, Trump’s supposed sequel will make for an intriguing backdrop for stocks to buy.
That’s because whether you agree with the former real estate mogul or not, he does know how to throw painful zingers. At the moment, the narrative is all about inflation — and a “scary” one at that, using Trump’s language. Further, he reiterated that inflation is going to “ravage our country.” Looking at various consumer prices, it’s hard not to come to the same conclusion. Should he be right, you should consider inflation-positive stocks to buy.
For instance, companies tied to rare, valuable or economically productive commodities would be a surefire bet during an inflationary surge. You’ll want to think about what people want or need and move your money there. Not helping matters regarding rising prices is that many Americans are sitting on major cash reserves due to lack of spending during the lockdowns last year. A rush of money toward limited goods will cause inflation, boosting relevant stocks to buy.
Granted, I’m personally not the biggest fan of buying into the political rhetoric, as it’s a flip-flopping sector. Guaranteed, when the inflation narrative ceases to be convenient for Trump, it will be something new. For now, though, the argument does carry some weight.
If you’re a believer in “45,” these stocks to buy may benefit substantially:
- Newmont Corporation (NYSE:NEM)
- Freeport-McMoRan (NYSE:FCX)
- ASML Holding (NASDAQ:ASML)
- International Paper (NYSE:IP)
- Chevron (NYSE:CVX)
- American Water Works (NYSE:AWK)
- Olin Corporation (NYSE:OLN)
But before you go too wild with the inflation storyline, keep in mind that the Federal Reserve will have an incentive to keep the situation under control. Thus, a non-zero probability exists that inflation-positive stocks to buy could get too overheated. As usual, please perform your due diligence before proceeding.
Stocks to Buy: Newmont Corporation (NEM)
This is an easy one if you want to protect yourself from inflation. However, just because something is obvious doesn’t always mean that it’s not effective. Per its website, Newmont Corporation has the “largest gold reserve base in the industry underpinned by our world-class ore bodies in top tier jurisdictions.”
Setting aside the recent upswing in precious metals, the sector admittedly hasn’t performed well on a trailing-year basis. Even though I advocate for some diversification into physical precious metals (and yes, for disclosure, I practice what I preach), I wouldn’t begrudge anyone for labeling the gold and silver market disappointing.
Fundamentally speaking, at least some of the underperformance can be tied to money velocity, or the lack thereof. Economic data shows that people aren’t spending money, which is a deflationary circumstance. But at the current juncture, the worsening global supply chain crisis has panicked many consumers, leading to rising prices across the board.
Therefore, until circumstances normalize — which isn’t looking too hot, I might add — NEM could be your ticket to cynically benefit from the inflationary pressure.
I have nothing in common with the great Eric Fry. But sometimes, the stars align in strange ways and I happen to be the reputational beneficiary of one such orientation. It turns out, both Fry and I had positive things to say about commodities giant Freeport-McMoRan earlier on. Having plunked some of my investment funds into FCX, I can confirm some of the details of Fry’s recent marketing blitz.
FCX certainly has been a very good portfolio booster. But if President Biden continues to make inflation great again, Freeport-McMoRan could still be among the stocks to buy.
Now, a quick clarifier before I get angry emails from the left: I don’t think you can blame Biden or any one single administration for broader trends in monetary dynamics. Because the economy ebbs and flows, it’s foolish for any politician to take credit for what happens on Wall Street or Main Street.
Having said that, commodities including copper (of which Freeport-McMoRan is a major producer) have risen substantially higher against prior years’ levels, making FCX a natural choice for inflation-positive stocks to buy.
Stocks to Buy: ASML Holding (ASML)
When it comes to commodities-related stocks to buy, many investors quickly think about the rarity of the assets themselves. However, it’s also important to focus on their economic viability. Silicon is “the second-most abundant element on Earth following oxygen,” per Earth Magazine. Yet a world without silicon is unimaginable today, because it’s the essential material behind semiconductors.
In that sense, ASML is relevant in two ways. First, it’s involved in the semiconductor industry, which has been on fire due to the global supply crunch. Second, as CNBC wrote recently, “ASML provides chip makers with essential hardware, software and services to mass produce patterns on silicon using a method called lithography.”
Moreover, it’s the “only company in the world offering extreme ultraviolet lithography machines,” which allow semiconductor specialists to manufacture the “smallest and most sophisticated chips.” Because of its integral business and unassailable value to the semiconductor supply chain, some analysts are forecasting a major spike in its valuation.
I think it’s a reasonable assumption given its unique profile. Therefore, investors seeking stocks to buy to protect themselves from this inflationary cycle should look into ASML.
International Paper (IP)
In a world that’s increasingly going digital, International Paper seems an awfully anachronistic inclusion in this list of stocks to buy. And while gold bugs may decry fiat currencies as not being worth the paper they’re printed on, they’re actually onto something: paper itself is becoming a highly sought-after commodity.
I’ve had trouble accepting this as — like I’m sure most of you have — I’ve increasingly gone paperless in my day-to-day personal routines. Still, data indicates that the relatively quick rollout of Covid-19 vaccines caused a demand spike, particularly for fine papers and white boxboards. As well, NextPage had this to say about the paper market:
“Typically, the U.S. imports a significant amount of paper. Every country in the world is experiencing similar supply chain challenges. This has caused a reduction of paper coming into the U.S. In addition, the cost for shipping a container of paper overseas has raised from an average of $1,700 to an average in excess of $6,000.”
Even the most mundane commodities are on the rise, making IP one of the more underappreciated stocks to buy.
Stocks to Buy: Chevron (CVX)
If you had the chance to buy a hybrid or electric vehicle but instead opted to drive a gas-guzzling V8-powered muscle car, you might be kicking yourself now. As someone who doesn’t drive all that much these days, I must admit that I don’t pay too much attention to prices at the pump. But recently I did, and I wasn’t too happy to see that the premium gasoline I need was nearing $5 a pop.
While that’s just my observation, it aligns with the surge in energy demand that’s hit across the country. Recently, CNN reported that the average price at the pump hit $3.27 a gallon, a near doubling since prices bottomed at $1.77 in April 2020.
Predictably, the Biden administration reached out to the oil industry for some help curbing rising prices. I don’t think such overtures will work, because as the Brookings Institution pointed out, energy price controls have been imposed before. Ultimately, they don’t work because they disincentivize producers to sell efficiently.
That’s why investors should consider Chevron. With the global supply strain combined with the economy reopening, CVX is one of the stocks to buy that can reasonably benefit from inflationary pressures.
American Water Works (AWK)
Per the Bill of Rights, “Congress shall make no law respecting an establishment of religion.” Only now, after decades of magical thinking, do we realize that appeals to higher powers should not supersede good stewardship of natural resources and our duty to protect the environment for future generations. Data from NASA shows that we must start acting right away:
“At the end of July 2021, the water elevation at the Hoover Dam was 1067.65 feet (325.4 meters) above sea level, the lowest since April 1937, when the lake was still being filled. The elevation at the end of July 2000–around the time of the Landsat 7 images above and below–was 1199.97 feet (365.8 meters).”
Since water is the most precious resource we have on this planet, it behooves us to do whatever we can to secure access to it. But because of the massive impact of climate change, we may not be able to secure enough of it, meaning that water resources will come at a sharp premium.
Cynically, this will provide a downwind benefit to water services firms like American Water Works. Opening on Oct. 18 at $170.72, AWK has dropped double digits from its all-time closing high, making it one of the discounted inflation-positive stocks to buy.
Stocks to Buy: Olin Corporation (OLN)
Across the nation, crowds have been expressing their displeasure with Biden’s administration with some simple, effective invective. Nevertheless, there is a way for Biden to turn the narrative around.
Rather than just reaching out to oil companies, he could ask ammunitions manufacturers to help the general public out by reducing the cost of bullets, particularly for popular calibers like 9mm. Per a Forbes article, “prices for ammunition spiked dramatically in recent months, at times quadrupling their pre-pandemic prices for some calibers, while other calibers experienced still-significant price hikes of 25%.”
Of course, Biden’s not going to do this, leaving yet another door open for the return of Trump. Either way, investors considering stocks to buy that will benefit from inflation should target Olin.
A chemicals company, Olin owns the popular Winchester ammo brand — and business is stunningly good. With the turmoil of the Covid-19 pandemic, gun sales soared through the roof, which only incentivized ammo sales.
Like other disrupted industries, there’s no telling when the ammo shortage will end. As well, the firearms community is an enthusiastic one, meaning OLN could have very long legs.
On the date of publication, Josh Enomoto held a LONG position in FCX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.