The data is in on U.S. consumer prices for June 2022. According to recent reports, they accelerated sharply in June, demonstrating their fastest rise since 1981. Yahoo Finance reports that “the Bureau of Labor Statistics’ Consumer Price Index (CPI) reflected a year-over-year increase of 9.1% last month, up from the prior 40-year high of 8.6% in May.” This higher-than-expected report certainly surprised analysts. Those statistics are hardly encouraging. However, some investors may take comfort in the fact that markets may finally be nearing peak inflation. With oil and gas prices continuing to fall, some experts expect to see other sectors follow a similar trajectory. If peak inflation is indeed approaching, investors will be searching for the best stocks to buy to stay ahead.
With consumers prices still rising across many sectors, focus is shifting to the Federal Reserve. U.S. markets have seen multiple interest rate hikes this year and investors are already expecting another. However, some experts predict that consumers will see more relief when the July CPI report is released. Chief U.S. economist of Morningstar, Preston Caldwell sees the June report as a peak inflation indicator:
The uptick in inflation was driven heavily by food and energy prices, but indicators of food and energy prices have plummeted in July, which will show up in the next CPI report.
Even if Caldwell is correct, prices won’t start dropping overnight. Moreover, they will fall gradually as markets adjust to consumer indexes cooling across various sectors.
Let’s take a look at the best stocks to buy as markets approach peak inflation:
|MOS||The Mosaic Company||$43.69|
|SBLK||Star Bulk Carriers||$22.28|
Dollar Tree (DLTR)
Despite raising prices above the signature $1 mark in late 2021, budget chain Dollar Tree (NASDAQ:DLTR) has had an impressive year. DLTR stock has risen 28% over the past six months. In late May, InvestorPlace contributor Jaimini Desai reported that “even with inflation knocking down the market,” DLTR stock has demonstrated impressive growth. It’s easy to see why. As fears of approaching recession and increasing inflation has come to dominate market coverage throughout 2022, companies in Dollar Tree’s niche have become increasingly appealing to investors looking for inflationary hedges.
“Macroeconomic factors have also been supportive as retailers catering to the middle-class have struggled while those focusing on the higher or lower-end have thrived” reported Desai. “Of course, the recent combination of inflation, coupled with an economy potentially rolling over, could lead to an increase in revenue for DLTR.” But even if market conditions do improve, DLTR will still rank among stocks to buy. As InvestorPlace contributor Thomas Niel notes, it is well positioned to generate solid returns through both good and bad times, making it a strong buy in uncertain conditions.
Dorian LPG (LPG)
The energy market is turbulent right now but Dorian LPG (NYSE:LPG) is a fairly safe bet. This company operates in the niche area of liquefied petroleum gas shipping. It deals primary in very large gas carriers (VLGCs) and currently operates a fleet of 22, providing “in-house commercial and technical management services” for every one. InvestorPlace contributor Stavros Georgiadis recently ranked LPG among his top stocks to buy for rising inflation, praising its large dividend yield of 69%.”
This shipping stock is up nearly 17% in 2022, and the financials support this rally,” he noted. “The company has been profitable for many years. Revenue grew by 111% in 2020, and though its growth has slowed down moderately, the firm is generating very consistent and positive free cash flows.” LPG is rising today despite falling 8% over the past month. But investors shouldn’t be fooled. These declines could be a valuable opportunity to buy the dip before inflation-driven momentum pushes the stock up higher.
Mosaic Company (MOS)
The Mosaic Company (NYSE:MOS) have been struggling lately. That’s exactly why investors should seize the opportunity to capitalize before it starts rising again. As InvestorPlace contributor Brian Paradza notes, “the Mosaic Company’s stock is one of the best stocks to buy for inflation because it supplies basic primary agricultural inputs its customers can’t resist buying even as prices rise.” The agricultural inputs to which he refers are potash, phosphate and other chemicals which farmers depend upon. Mosaic is the country’s largest producer of fertilizer, both phosphate and potash.
Mosaic’s dynamic holdings make it an important hedge against inflation. It has been a difficult year for agriculture but that doesn’t mean that farmers aren’t working hard to keep their crops coming. And as InvestorPlace contributor Faizan Farooque reports:
Mosaic supports farmers in managing their crops and land. It’s essential that farmers know what to do for optimal yield and how much water or fertilizer to use for each crop, and Mosaic’s products make all of that easier.
He adds that the company’s reported $12.4 billion in revenue, an increase of 42% from 2020, makes it a temping play among large cap stocks that have struggled recently.
Star Bulk Carriers (SBLK)
Anyone who counts LPG among stocks to buy to beat inflation should also have Star Bulk Carriers (NASDAQ:SBLK) on their radar. SBLK is a fellow shipping company that specializes in bulk dry goods. Though it isn’t quite as niche as Dorian, Star Bulk boasts a larger fleet with 128 vessels. But like Dorian, SBLK boasts impressive financials, offering investors a forward dividend yield of 29.39% and a price-to-earnings ratio of 2.73. While it trades at a higher per-share price than Dorian, both are still at fairly low levels, making this an ideal buying time.
InvestorPlace contributor Stavros Georgiadis has also praised SBLK for staying its course amid the 2022 market selloff. As he notes: “there is a similar bullish thesis with Star Bulk Carriers as the two shipping companies have many things in common and are value stocks.” It is important to note that Wall Street is still highly bullish on SBLK. CNN Business reports that seven analysts have issued a high estimate of $41 per share and a low estimate of $22 per share with $37 as the median price target.
Through all the bearish energy that markets have seen lately, Unilever (NYSE:UL) has received significant praise. As inflation has risen, fears of a bear market have played a key role in investment decisions. “Many of the best bear market stocks are names in the personal products space” reports InvestorPlace contributor Thomas Niel. “A good example is Unilever (NYSE:UL). This Anglo-Dutch firm is unique in that it’s involved in both personal products as well as food products.”
Indeed, the U.K.-based company is known for its dynamic reach across many consumer goods and staples. And while it is often compared to the U.S’s Procter & Gamble (NYSE:PG), Unilever boasts a much lower valuation and trades at less than a third of the per-share price. That makes it a solid bet for investors looking to profit as inflation nears its peak. While PG could also be counted among stocks to buy for peak inflation, UL’s appealing financials will make it a temping play. Additionally, activist investor Nelson Peltz, an expert in the field of consumer brands, recently joined its board of directors. Despite falling today, UL stock has risen more than 5% over the past month.
On the date of publication, Samuel O’Brient 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.