- UnitedHealth Group (NYSE:UNH) – This managed care leader offers double-digit earnings and dividend growth
- Abbott Laboratories (NYSE:ABT) – A dividend king with a forecast for continued revenue and earnings growth
- Deere & Co. (NYSE:DE) – Well positioned for strong demand in the second quarter
- Nucor (NYSE:NUE) – A savvy investment in clean energy adds another vertical
- Lam Research Corp (NASDAQ:LRCX) – An undervalued semiconductor stock with strong free cash flow
- Qualcomm (NASDAQ:QCOM) – A major move into the connected car sector supports an attractive valuation
- Nike (NYSE:NKE) – Further proof that premium brands can support a premium valuation
Inflation remains a top-of-mind concern for investors as they look for the best stocks to buy, and April’s Consumer Price Index (CPI) and Producer Price Index (PPI) readings did nothing to change that.
However, for the first time in several months, there was a silver lining. The core CPI number (the one that excludes food and groceries) came in lower than expected at 0.3% versus an expected 0.5%.
That has some analysts believing that the market may have seen peak inflation, but that doesn’t mean consumers won’t continue to be feeling the effects of higher prices for some time.
However, high but falling inflation can change the composition of investors’ portfolios. Rather than just looking for hedges against inflation, investors may begin to look for some growth stocks to buy, including in some areas that have been beaten down.
That’s the focus of this article. I’m looking at seven stocks to buy if inflation is at, or near, its peak.
|DE||Deere & Co||$424.36|
|LRCX||Lam Research Corp||$469.51|
Inflation Stocks to Buy: UnitedHealth Group (UNH)
UnitedHealth Group is becoming a giant in the managed health care sector. Historically, healthcare stocks are among the first that investors look at when they suspect that inflation is at or near its peak.
One of the catalysts for UnitedHealth’s growth is found in its Medicare Advantage portfolio.
UnitedHealth Group was a big winner for investors in 2021 because it delivered double-digit growth in earnings and revenue. And if the company’s first-quarter earnings report is any indication, it may deliver more of the same in 2022.
UNH has also been showing double-digit dividend growth. It has increased its dividend in each of the last 13 years, and past history suggests that investors may be treated to another dividend increase prior to the company reporting earnings in July.
Abbott Laboratories (ABT)
Whatever UNH Group can do, Abbott Laboratories can do better. Or at least longer.
Abbott Labs has increased its dividend payment in each of the last 50 years. This puts it in the exclusive Dividend Kings club. A dividend yield of 1.53% is above the sector average of 1.06%.
There are other reasons why ABT makes this list of stocks to buy. The company derives a significant amount of its revenue from two of its four business units: diagnostics and medical devices.
It should please investors to know that both of these sectors are projected to show strong growth in the next few years. As a leader in each category, it’s likely that ABT stock will lean into that growth.
The company has increased revenue by an average of more than 15% for the last five years and some analysts expect to see continued double-digit earnings growth in the next five years as well.
Inflation Stocks to Buy: Deere & Co (DE)
Deere & Co. is known for its signature green and yellow equipment. It manufactures the tractors, backhoe loaders, excavators and other industrial equipment that will likely be in high demand as infrastructure funding is spent.
This is especially true as farmers look to capitalize on rising crop prices and demand for new home construction remains strong.
After recording a double beat in its last earnings report, DE stock plummeted. Its earnings per share were down sharply from the prior year. At the time, the sell-off seemed overdone. Sure enough, just two months later, Deere stock is on the rise again.
DE stock is approaching the top of its 52-week range but analysts still have it as a “buy.” The company is expected to post strong earnings per share when it reports in May. If it meets or exceeds that expectation and follows it up with strong guidance, the price target will likely rise.
Moving to the materials sector brings me to Nucor. It’s the largest steel manufacturer in the United States and steel demand is increasing at the nation rebuilds its infrastructure.
The company is also getting a lift because the Russian invasion of Ukraine is keeping larger steel exporters offline.
However, the company has another catalyst as Louis Navallier recently pointed out. Nucor company is making a $15 million investment in NuScale, a next-generation nuclear power company, which manufactures small, modular reactors (SMRs).
As Navallier writes, “NUE is likely investing because NuScale will need a steelmaker for containment vessels and this would make the whole operations a U.S.-made venture.”
Nucor president and CEO Leon Topalian pointed to NuScale’s clean energy focus as being consistent with its own sustainability goals. Nucor is also a strong dividend stock, having increased its dividend in each of the last 49 years.
Inflation Stocks to Buy: Lam Research Corp (LRCX)
Lam Research makes up part of a duopoly with Allied Materials (NASDAQ:AMAT). Both companies provide components to chip manufacturers.
There is some concern that the chip market may be cooling off.
That concern is being reflected in LRCX stock which is down more than 35% since the beginning of the year.
The company has reported that it expects its deferred revenue will continue to grow, though, and that’s good news for earnings growth as well.
Plus, Lam Research already has strong fundamentals including strong and growing free cash flow. Analysts seem to agree. The stock has a consensus 12-month price target of $709.52, an upside of more than 47%.
It also appears that Lam Research has a valuation that potentially leaves room on the upside and may be eyeing a stock split sometime in 2022.
Your decision to buy Qualcomm will largely depend on how you view its growth narrative.
On the one hand, much of the company’s current revenue comes from its relationship with smartphone manufacturers.
There’s a question about how long that growth can last. That’s one reason that two analysts have lowered their price targets for Qualcomm in April.
However, in each case the analysts still rated Qualcomm stock as a “Buy.” That may have to do with Qualcomm becoming a major player in the connected car space. To that end, Qualcomm recently signed a multi-year contract to provide its chips to Stellantis (NYSE:STLA).
Qualcomm has a reasonable valuation and the forecast for earnings and revenue support the company’s $200.61 price target which is 42% higher than the stock’s price as of this writing.
Inflation Stocks to Buy: Nike (NKE)
For the second time this month, I find myself recommending Nike. The company delivered a strong earnings report in late March.
As I predicted then, the company has seen a slew of increased price targets which now leaves room for the stock to post continued growth in future quarters.
To recap, the company is managing to grow margins despite the fact that costs are rising and the company is still trying to navigate supply chain disruptions. One area that is showing particular strength is e-commerce. This is an area where Nike has not always been strong.
However, as I also pointed out in my previous recommendation, NKE stock does sport a premium valuation. For now, the company is justifying that valuation; premium brands frequently prove that. I believe investors should continue to pay attention to the interest of institutional investors. Although not strongly bullish, it is increasing in recent quarters.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.