Worried About Inflation? 3 Stocks Built to Thrive in a High-Price Environment


  • Here are three inflation-resistant stocks to buy now. 
  • Marathon Petroleum (MPC): The refiner is ready for the usual summer surge. 
  • Hershey (HSY): Its stock has underperformed in the past year. Higher cocoa prices aren’t helping.
  • Zimmer Biomet Holdings (ZBH): With Covid-19 in the rearview mirror, hip and knee replacements are in demand. 
Inflation-Resistant Stocks - Worried About Inflation? 3 Stocks Built to Thrive in a High-Price Environment

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Although the demand for inflation-resistant stocks has fallen in the past six to 12 months as consumer prices have moderated, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon isn’t convinced inflation has gone the way of the dodo bird. 

“Many key economic indicators today continue to be good and possibly improving, including inflation. But when looking ahead to tomorrow, conditions that will affect the future should be considered. For example, there seems to be a large number of persistent inflationary pressures, which may likely continue,” Dimon wrote in his 2023 letter to the bank’s shareholders. 

If you have not noticed, gas prices at many places have started to creep up during this pre-summer season. That’s near-term inflationary pressure. As Dimon says, higher inflation could be the new normal.

If so, it remains tactically savvy to consider owning businesses that are inflation-resistant in most, if not all, economic environments. 

If you’re in this camp, here are three stocks to buy for the long haul.

Marathon Petroleum (MPC)

Marathon Oil gas station carport on sunny day with blue sky background
Source: Jonathan Weiss/shutterstock.com

Marathon Petroleum (NYSE:MPC) reported its Q1 2024 results on April 30. It beat the analyst estimates for both revenue and earnings. Revenue was $33.2 billion in the first quarter, $1.19 billion higher than Wall Street’s forecasts. Earnings were $2.58 a share, four cents better than analyst expectations. 

As is the case with most refiners, it’s normal to shut down operations temporarily to carry out maintenance on the equipment. According to CEO Michael Hennigan, Q1 2024 was the largest planned maintenance quarter in the company’s history. 

As a result, the company’s crude capacity was just 82%, resulting in 2.7 billion barrels per day flowing through its refineries. Lower refining and marketing prices per barrel — $18.99 per barrel, down from $26.15 in Q1 2023 — were also a factor in lower oil prices. 

However, as Hennigan said about the maintenance, “This positions us to meet the high demand of summer travel season.”

It would be shocking if gas prices at the pump don’t set records this summer. Demand should be high, leading to higher margins for Marathon. Unlike upstream businesses, refiners get paid to move oil and natural gas so they won’t be as susceptible to future economic slowdowns.

That doesn’t, however, mean it’s immune. Q1 2024 demonstrates this very clearly. 

Hershey (HSY)

Hershey's milk chocolate pieces on a white plate on top of a wooden table
Source: shutterstock.com/VG Foto

Of the three names on the ist, Hershey (NYSE:HSY) is the worst performer over the past year, down 29%. It will report Q1 2024 results on May 3 before the markets open. 

All eyes will be on the company because of skyrocketing cocoa and sugar prices. When input costs rise quickly, it can be challenging for chocolate businesses like Hershey to raise prices fast enough to maintain margins. 

“A lot of investors are waiting to learn about how the consumer is reacting to the current price of chocolate in the market and how that influences the companies’ decisions to take more pricing in the future,” Reuters reported comments from Sean King, an analyst at Columbia Threadneedle Investments.

The portfolio manager owns shares in Hershey and Mondelez International (NASDAQ:MDLZ), which produces Cadbury chocolate bars. 

According to data from market research firm Circana, unit sales were down 1.8% through the 13 weeks ended March 24, while prices were 6.3% higher. Investors are waiting to see if there’s a way out of this.

Analysts tend to prefer Mondelez over Hershey. Both are expected to report their first earnings declines in many quarters, so you should wait to buy until after Hershey reports. 

But in the long-term, you can’t go wrong. 

Zimmer Biomet Holdings (ZBH)

Nurse holding a tablet with icons representing different aspects of healthcare and healthcare data representing CANO stock. Healthcare Tech Stocks
Source: metamorworks / Shutterstock

Zimmer Biomet Holdings (NYSE:ZBH) has greatly disappointed long-time shareholders. Its shares have increased less than 1% over the past five years and fallen about 16% over the past year. 

Why is it on thist list? 

Well, the business specializes in joint reconstruction — such as hips, knees, etc.— and unlike the pandemic, these aren’t surgeries that would be postponed for anything other than Covid-19. That translates into stable revenues and earnings. 

Analyst expectations for its Q1 2024 results — it will report May 2 — are for revenues to be higher from a year ago, with lower year-over-year earnings. The Zacks consensus estimate on the top line is $1.87 billion in revenue, 2.3% higher than Q1 2023, on earnings per share of $1.88, down 0.5% from a year ago. 

These are very bland, mediocre results. 

However, on April 25, Zimmer announced that Mayo Clinic orthopedic surgeon Dr. John W. Sperling completed the world’s first robotic-assisted shoulder replacement surgery with the company’s ROSA Shoulder System. 

“Adding robotic surgical assistance to shoulder replacement surgery has the potential to transform intra-operative and post-operative outcomes, while improving the overall patient experience,” said Dr. Sperling. 

The company’s adjusted operating margin in 2023 was 28.2%, the highest over the past four years. Its shares are trading at just 16.0 times its 2023 adjusted earnings per share of $7.55. It’s reasonably priced. 

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/worried-about-inflation-3-stocks-built-to-thrive-in-a-high-price-environment/.

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