Inflation is down from the 40-year highs it registered in 2022. However, I hate to be the bearer of bad news, but any moderation is likely to be over. That’s why it’s still time to keep an eye out for some of the best inflation stocks.
The biggest reason for higher inflation is that oil prices continue to rise. That will affect more than prices at the pump. If you’ve been at the grocery store, you know that food prices are still stubbornly high. Yet, it won’t be long before the companies with pricing power will pass their higher transportation costs along their supply chains.
And precious metals may be another place to look for the best inflation stocks. If inflation starts moving higher, every dollar has less value. That’s a bullish scenario for the price of gold. And while some investors may choose to buy physical metals, gold stocks are also a good place to build an inflation hedge for your portfolio.
The consumer staples sector is one place to look for the best inflation stocks, and an obvious choice is Coca-Cola (NYSE:KO). Most investors know that KO stock is a favorite of Warren Buffett. However, the “why?” is as important as the 400 million shares that Buffett owns.
Coke is a proven performer regardless of the economic situation. That performance translated into revenue, earnings and one of Buffett’s favorite items – dividends. Coke is a dividend king that has increased its dividend in each of the last 62 years.
Don’t rule out the fact that this isn’t the same company that it was just 10 years ago. It’s still a beverage company, but it continues to strategically position itself for a younger audience looking for variety.
Some investors may prefer PepsiCo (NASDAQ:PEP). To be fair, both are solid choices. Both are expected to grow earnings above 7% in the next 12 months. Additionally, some investors may prefer PEP stock because of its dual focus that includes snack foods. However, at this moment, it looks like investors may get a little more share price growth with KO stock. It also trades for a slightly better valuation with a forward P/E of 22x.
First, despite CVX stock rising 4.2% in the last month, shares are still at $166. That’s not quite the bargain they were, but it’s still trading at a discount. Second, this is another solid dividend payer. Chevron hasn’t reached “king” status yet, but it has increased its dividend for 37 consecutive years. The dividend has been growing over 6% in the last three years.
Chevron is one of the “traditional” energy companies making investments in alternative energy projects. The company has a “measure twice, cut once” strategy to ensure that its capex spend puts the company into a position where it can add value. Those initiatives are likely to boost earnings in coming years, which will lead to further share price gains.
Exxon Mobil (NYSE:XOM) is another good name in this space. However, Chevron gets the nod in projected earnings and in analysts’ forecast for share price growth.
Newmont Corporation (NEM)
I know gold is a no-go for many investors. But you don’t need to be a gold digger to take a closer look at Newmont Corporation (NYSE:NEM) at this time.
The price of gold and the price of the dollar has an inverse relationship. That’s why falling inflation has put a ceiling on the spot price of gold. But if inflation begins to pick up, the price of gold will likely rise along with it. That’s why you can benefit by investing in the world’s largest gold miner based on the 2022 volume.
Inflation isn’t the only scenario that can be bullish for gold. The BRICS nations may be years away from having a viable gold-based currency. But just the fact that a conversation is underway is noteworthy. Plus, if the Fed is successful in pulling off a soft landing, gold will be popular because of its utility in critical applications.
Newmont is projected to grow earnings at a rate of 35% in the next 12 months. That has analysts giving NEM stock a consensus price that’s 50% higher than its closing price on September 5, 2023. Plus, the stock comes with a forward P/E ratio of just 18x which makes for an appealing valuation.
On the date of publication, Chris Markoch had a LONG position in CVX. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.