3 Stocks That Could Surge as Inflation Fears Subside


  • Inflation is finally starting to subside, which will be a boon for these three stocks.
  • Nike (NKE): Easing inflation will give this apparel giant a much-needed break.
  • American Tower (AMT): The communications REIT will enjoy higher cash flows as interest rates and inflation decline.
  • Whirlpool (WHR): An improving economy and pricing situation should revive this appliance maker’s fortunes.
stocks to buy - 3 Stocks That Could Surge as Inflation Fears Subside

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Since the onset of the Covid-19 pandemic, inflation has become quite a sticky problem. It has taken far longer than expected for economic disruptions to work their way through the system.

While many analysts hoped that inflation would be transitory, rises in energy costs and foreign wars have led to prices remaining elevated. The Federal Reserve would currently like to lower interest rates, but it has held off so far due to inflation remaining above its target level.

However, it appears that inflation is finally coming under control. The rate has already dropped dramatically from the prior peak. And with some signs of a softening economy and labor market, it appears that inflation will finally come back in-line. This could make it a great time for these three stocks to buy today.

Nike (NKE)

NKE stock: A photograph of the storefront of a Nike store.
Source: Square Box Photos / Shutterstock.com

Nike (NYSE:NKE) stock is down more than 14% year-to-date and has risen a mere 12% over the past five years. While prices may be inflating in the consumer economy, this hasn’t had a favorable impact on Nike’s operating results.

It’s not hard to see why. Nike relies heavily on Asian markets like China for a large chunk of its overall revenues and growth prospects. With the prolonged Chinese economic slump, Nike has seen a sharp decline in its operating results there.

More broadly, it seems that inflation has impacted consumers’ willingness to spend on discretionary items, such as fitness apparel. Nike is hardly the only company in its sector struggling with sales growth and profit margins right now.

However, things could turn around surprisingly quickly. There are already some economic green shoots starting to appear in China. Meanwhile, any drop in inflation and resulting improvement in consumer sentiment could cause NKE stock to bounce back quickly.

In the bigger picture, Nike’s celebrity endorsements, global brand and powerful distribution channels give it the sticking power to make it through this downturn and come out stronger.

American Tower (AMT)

American Tower Corporation logo on a smartphone with the website in the background on a computer screen. AMT stock.
Source: T. Schneider / Shutterstock

American Tower (NYSE:AMT) is the world’s largest real estate investment trust within the specialized category of telecom and communications assets. It controls more than 224,000 communications sites. American Tower’s business is primarily in operating cell phone towers, both in the United States and increasingly in many emerging markets, such as Latin America and India.

AMT stock has been exceptionally successful. Shares fell to as low as $2 in the economic downturn following the dotcom bust and 9/11. Since then, shares have risen nearly one-hundredfold to $192 per share today.

American Tower enjoys an incredible growth runway, putting up the infrastructure necessary to power the world’s telecom networks. With the proliferation of smartphones, streaming video and online work and commerce, demand for mobile data has exploded. The rapid uptake of 5G communications in emerging markets adds another catalyst.

Despite all the positives, AMT stock is now essentially flat over the past five years. That’s due to inflation worries. American Tower runs a heavily levered balance sheet to fund all its real estate and interest costs rise in an inflationary environment.

All this to say that American Tower has a rock-solid business model and growth prospects. Its upward climb has been temporarily interrupted by high inflation and interest rates, but as those factors fade, AMT stock will be set to soar once again.

Whirlpool (WHR)

Whirlpool (WHR stock) logo on a dishwasher
Source: Konektus Photo / Shutterstock

Household appliance maker Whirlpool (NYSE:WHR) has gotten put through the spin cycle over the past four years.

WHR stock shot up from $150 to $250 during the pandemic. With people stuck at home and flush with extra disposable cash, appliance sales went through the roof. Demand subsequently slumped, however, and Whirlpool stock has crashed to less than $100 per share today, well below where it was at the onset of Covid-19.

Whirlpool’s operating earnings are currently down, and investors are assuming the worst. That’s a mistake. While appliance demand is at a cyclical trough right now, there’s little reason to think demand will be permanently impaired.

On the contrary, Whirlpool has slashed costs and improved its operating structure to deal with the current dip. In the meantime, any improvement in the interest rates and inflation fronts could spark a new wave of demand for Whirlpool.

The moment interest rates drop and people start applying for home equity lines of credit again, Whirlpool should be set for a massive recovery. In the meantime, WHR stock goes for just 12 times forward earnings and offers a 7.66% dividend yield.

On the date of publication, Ian Bezek held a long position in NKE and AMT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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