The U.S. is grappling with serious problem: runaway inflation.
The fact of the matter is the U.S. is now teetering on the edge of a recession as stagflation zaps consumer buying pressure and economy growth stalls. As a result, Americans are now facing empty store shelves and surging gasoline prices.
With inflation spinning out of control, the Federal Reserve has to raise key interest rates because market rates are rising. The fact of the matter is the Fed cannot fight market rates.
Scared? Everyone is.
However, if you’re invested in the right stocks, then you shouldn’t be. Historically, growth stocks and dividend stocks are your best defense against rising inflation. The reality is stocks are great inflation hedges because they represent ownership in real businesses. And great businesses act as inflation “pass through” vehicles. An inflation “pass through” vehicle is a business that “passes along” the price increases that occur as a result of inflation.
The nominal price of inputs and product prices might change, but the businesses’ profit margins do not. They simply “pass through” the inflation, which allows their profits and market values to rise along with prices.
Of course, you don’t want to invest in just any stock. You want the best of the best. The companies whose growth won’t be curtailed by inflation and will continue to boast strong earnings and sales growth.
In this report, I’m going to show you 11 companies that have emerged as the crème de la crème that you should buy in 2022. With strong sales growth and profits ahead, these stocks are a must-have for your portfolio as we navigate our way through this inflationary environment.
Top Stock #1: ATKR
Since its founding back in 1959, innovation has been at the heart of Atkore, Inc.’s (ATKR) business.
In fact, the company patented the Flo-Coat galvanizing process, which applies zinc as tubes and pipes are being manufactured. The process has been the foundation of Atkore’s manufacturing process since its first single tube mill opened its doors in 1960.
Today, Atkore is a leading manufacturer of galvanized steel tubing and pipe products, including electrical conduits, flexible sprinkler pipe and light gauge steel tubes. The company’s products are sold under several brand names: Allied Tube & Conduit—the company’s original name—as well as FlexHead and Tectron Tube. Atkore also produces electrical support system products under the Unistrut, Power-Strut and Cope brand names, as well as other electrical cables, conduits, PVC and cable protection products.
Atkore is proud to offer a vast portfolio of electrical raceway and mechanical products and solutions that are utilized by more than 50 end-markets. This includes agriculture, commercial construction, industrial and power generation, as well as federal, state and local governments. And Atkore services its customers through 65 manufacturing and distribution facilities around the world.
Shares of the company soared out of the gates following the company’s exceptional results for its second quarter in fiscal year 2022. Second-quarter sales jumped 53.6% year-over-year to $982.6 million, besting estimates for $800.9 million. Atkore also achieved second-quarter earnings of $233.5 million, or 86.9% year-over-year earnings growth. Adjusted earnings per share surged 93.2% year-over-year to $5.39, up from $2.79 per share in the second quarter of 2021. Analysts were expecting earnings of $3.75 per share, so Atkore posted a 43.7% earnings surprise.
Atkore also increased its outlook for its fiscal year 2022. The company expects full-year sales to grow between 25% and 30% and to achieve adjusted earnings per share between $19.65 and $20.45. The new outlook is well above analysts’ current projections for full-year adjusted earnings of $13.44 per share.
Top Stock #2: BP
BP p.l.c (BP) is a familiar name to most, as the company has been around for more than 100 years. Back in 1901, William D’Arcy decided to risk his fortune to drill for oil in Persia (present day Iran). But it wasn’t until late May in 1908 when oil actually spewed from a “last-chance” well in a remote area of Persia. One year later, the Anglo-Persian Oil Company was in business.
Over the years, the Anglo-Persian Oil Company was on the verge of bankruptcy several times, as oil exploration in Persia was slow and plagued with delays. If that wasn’t discouraging enough, the company was having a hard time selling the thick Persian oil. And that’s when Winston Churchill entered the picture, as he was looking for a dedicated oil supply for the British Royal Navy. The United Kingdom became a major shareholder in the company.
After that, the “BP” oil brand became a familiar sight, as BP gasoline pumps started popping up all over the United Kingdom to keep up with the rise in vehicles hitting the streets in the 1920s and 1930s. The company took a hit during WWII like many businesses, and then another hit when Iran decided to nationalize oil operations. But the company didn’t throw in the towel. It changed its name to The British Petroleum Company, and started looking for other oil exploration opportunities.
Today, BP has a vast portfolio of upstream and downstream businesses around the globe, as it operates in 70 countries. The company is involved in oil and natural gas exploration, field development and production. It produces 3.6 million barrels of oil equivalent per day. BP also manufactures fuels, lubricants and petrochemicals. The company has also been at the forefront of alternative energy, investing in biofuels, biopower, wind energy and solar. And it operates more than 18,000 retail sites.
Thanks to the recent rise in oil and gas prices, the company achieved its highest quarter profit in more than 10 years. First-quarter earnings more than doubled to $6.2 billion, up from $2.6 billion in the same quarter a year ago. The company also reported first-quarter adjusted earnings of $1.92 per ADS, which crushed analysts’ estimates for $1.35 per ADS by 42.2%. BP also announced first-quarter revenue of $51.22 billion, falling shy of estimates for $57.71 billion.
Top Stock #3: CAJ
Back in the early 1930s, Precision Optical Instruments Laboratory was founded to research quality cameras in Tokyo, Japan. In 1934, the company developed the first 35 mm focal-plane-shutter camera in Japan, naming it the Kwanon. Within a year, the “Canon” trademark was registered—and the rest, as they say, is history!
Today, Canon, Inc. (CAJ) is synonymous with not only high-quality cameras but also office multifunction devices (MFDs), printers, copiers, scanners, camcorders, projectors, x-ray systems, ultrasound equipment, radiography systems, MRI systems, semiconductor lithography equipment, OLED display manufacturing equipment, flat panel display lithography equipment and more.
In 2020, sales of its office products accounted for 46% of total sales, while imaging systems (cameras) accounted for 23%. Canon achieved total 2020 sales of 3.16 trillion yen, or $30.39 billion.
The company achieved strong results in its first quarter for fiscal year 2022. The company reported first-quarter revenue of $7.21 billion and earnings of $376.84 million. Earnings per share came in at $0.36, which was shy of forecasts for $0.44 per share. Looking forward, Canon expects 13.3% annual sales growth and 17.4% annual earnings growth for its full-year 2022.
Top Stock #4: CLFD
One corner of the market that has continued to expand, despite the global pandemic, is 5G.
As you probably know, 5G is the next generation of internet infrastructure and connectivity. With 5G, download speeds could be between 10 and 100 times faster than what’s currently available. All of the big wireless carriers, including Verizon, AT&T, Sprint and T-Mobile, are vying for the fastest network, and all released some form of 5G last year.
However, I’m not interested in the big wireless carriers. I see more opportunity in a company that’s designing and developing the fiber optic platform to enable 5G connectivity.
Clearfield, Inc. (CLFD) started operations as APA Enterprises with the acquisition of fiber connectivity operations from Americable and Computer System Products in 2003. But, by 2007, the company changed gears (and names!) and reinvented itself as a leading provider of fiber optic management, protection and delivery products.
The company’s “fiber to anywhere” platform was designed to not only meet the needs of broadband service providers, but also cut down on the costs associated with the deployment, management, protection and scalability of fiber optic networks. Clearfield’s “game-changing” Clearview Cassette is the building block of its FieldSmart product portfolio of cabinets, enclosures, panels and wall boxes. All of which are designed with flexibility, service and network migration capabilities.
Recently, Clearfield introduced the StreetSmart Small Count Fiber Hand-Off Box, which was developed to streamline a provider’s ability to extend fiber networks even further into the network at a more economical price. The product is expected to support not only 5G network rollouts, but also the rollout of fiber-to-the-premise (FFTP) and wireless access services.
With 5G spreading across the country, from urban city centers to rural areas, it’s not surprising that Clearfield has seen strong demand for its products – or that it posted record results recently.
In fact, the company achieved record results for its second quarter in fiscal year 2022. Thanks to accelerating demand for its solutions, Clearfield ended the quarter with a record backlog of $136 million, up from $101 million at the end of the first quarter. Given that most of the backlog is set to ship in the next six months and the company still has a strong pipeline, Clearfield also increased its outlook for fiscal year 2022.
First, in the second quarter, total sales jumped 80% year-over-year to $53.5 million, up from $29.7 million in the same quarter a year ago. That topped estimates for $44.1 million. Clearfield also reported second-quarter earnings soared 144% year-over-year to $0.66 per share, compared to $0.27 per share in the second quarter of 2021. Analysts were expecting earnings of $0.50 per share, so Clearfield posted a 32% earnings surprise.
For fiscal year 2022, Clearfield now expects revenue between $204 million and $218 million, up from previous estimates for $177 million to $183 million. The new outlook also represents 45% to 55% annual revenue growth.
Top Stock #5: COP
ConocoPhillips (COP) is one of the largest independent exploration and production companies in the world – and we added the stock to the Buy List in the April Monthly Issue. The company does a little bit of everything when it comes to crude oil and natural gas, extracting with hydraulic fracturing, horizontal drilling and offshore drilling, as well as producing and transporting the product.
In fact, ConocoPhillips has an extensive energy portfolio that spans 14 countries. The company transports oil and natural gas around the world through pipelines, as well as tankers, trucks and rail. And at the end of 2021, it had 6.1 billion barrels of oil equivalent in its reserves. As a result, ConocoPhillips benefited immensely from rising crude oil prices in 2021 – and I suspect its upcoming earnings report will reveal the company continued to prosper in the first quarter.
ConocoPhillips smashed analysts’ expectations for its first quarter in fiscal year 2022. First-quarter earnings soared 480% year-over-year to $5.8 billion, or $4.39 per share, up from $1.0 billion or $0.75 per share in the same quarter a year ago. First-quarter adjusted earnings jumped 373.9% year-over-year to $3.27 per share, which beat estimates for $3.03 per share by 7.9%.
ConocoPhillips noted that it produced 1.75 million barrels of oil equivalent per day in the first quarter. For the second quarter, the company expects production to be between 1.67 million and 1.73 million barrels of oil equivalent per day.
During the quarter, ConocoPhillips returned $2.3 billion to shareholders. The company also plans to pay a dividend of $0.46 per share on June 1. All shareholders of record on May 17 will receive the dividend. The company will also pay a variable third-quarter dividend of $0.70 per share on July 15 to all shareholders of record on June 28.
Top Stock #6: DAVA
Endava Plc (DAVA) was founded in 2000 with a vision of revolutionizing the relationship between technology and people. Simply put, Endava is a technology services company that helps its clients better engage with their users or customers. The company partners with financial, insurance, media, retail and telecommunications companies around the world.
Endava offers several solutions across the digital evolution, agile transformation and automation areas. The company provides a Digital Strategy solutions, including the design, development and engineering and integration lifecycle for a business. To increase employee collaboration, Endava offers Agile Transformation practices and solutions to understand challenges, as well as define and develop processes. And to help businesses be more productive in taking product concepts to operation, Endava engineers develop and implement Automation strategies, which includes infrastructure and software development.
Endava released results for its third quarter in fiscal year 2022 and provided a strong outlook for the rest of its fiscal year. During the third quarter, Endava noted that new customers accounted for more than one million pounds and grew to 118, up from 81 in the third quarter of 2021. Its top 10 clients accounted for 35% of total third-quarter revenue.
Third-quarter revenue jumped 50.7% year-over-year to 169.2 million pounds, compared to 112.3 million pounds in the same quarter a year ago. Adjusted earnings came in at 27.9 million pounds, or 0.48 pence per share, up from 19.3 million pounds, or 0.34 pence per share, in the third quarter of 2021. The analyst community expected third-quarter adjusted earnings of 0.43 pence per share, so DAVA posted an 11.6% earnings surprise.
Looking forward, Endava anticipates fourth-quarter revenue to grow between 46% and 46.5% year-over-year, while adjusted earnings per share are forecast to come in between 0.48 and 0.49 pence. For its fiscal year 2022, Endava expects revenue between 652.0 million and 654 million pounds and adjusted earnings per share between 1.91 and 1.92 pounds. Both the fourth-quarter and full-year outlooks are nicely higher than analysts’ current earnings estimates.
Top Stock #7: ENPH
Enphase Energy, Inc. (ENPH) developed the first microinverter system back in June 2008. You may recall that microinverters are vital to solar panels, as microinverters convert sunshine into usable electricity for homes and businesses. So, it’s not too surprising that Enphase Energy announced in mid-December that it had installed its one-millionth microinverter-based solar system.
In the past 12 years, Enphase Energy has shipped more than 23 microinverters around the world. The company now has more than 6.5 gigawatts DC of Enphase-based systems installed in 130 countries.
The company rallied strongly after the solar company posted stunning first-quarter results. During the quarter, Enphase Energy shipped about 2.8 million microinverters, which represents 1,290 megawatts DC, and 120.4 megawatt hours of Enphase IQ Batteries, with shipments to the U.S., Germany and Belgium.
Thanks to the strong shipments, Enphase Energy achieved record revenue of $441.3 million and earnings per share of $0.79. That translates to 46.2% year-over-year revenue growth and 41.1% year-over-year earnings growth. Analysts were expecting earnings of $0.66 per share on $432.28 million in revenue, so Enphase Energy topped earnings estimates by 19.7% and posted a slight revenue surprise.
Looking forward to the second quarter, Enphase Energy expects revenue between $490 million and $520 million, up from $316.06 million in the same quarter a year ago. The company also anticipates that it will ship between 130 and 140 megawatt hours of Enphase IQ Batteries.
Top Stock #8: ICL
Based in Israel, ICL Group Ltd. (ICL) is one of the top global producers of bromine, potash and phosphates, as well as the only provider of polysulphate. The company is actually number-one in bromine production worldwide and the largest producer of phosphorous-based flame retardants in the West. ICL Group also has a 24% share of the global phosphates market, and it is a top producer of soluble phosphate-based fertilizers.
With 42 facilities in 13 countries and 20 research and development centers around the world, ICL Group’s products are utilized by several key industries, including agriculture, food and industrial.
ICL Group operates primarily out of four main businesses: Industrial Products, Potash, Phosphate Solutions and Innovative Ag Solutions. In 2021, the company achieved record earnings and sales in its Industrial Products and Phosphate Solutions businesses, with 29% annual sales growth and 25% annual sales growth, respectively. ICL Group’s Potash business experienced 43% annual sales growth, thanks to strong global crop demand. And its Innovative Ag Solutions business saw sales surge 70% year-over-year to $1.25 billion, thanks to strong results from its two Brazilian acquisitions.
Thanks to increased demand and elevated prices for specialty minerals, ICL Group was able to overcome inflationary pressures and supply chain constraints during the quarter. Company management commented, “…all of our specialty businesses achieved new quarterly results records, as all four of our divisions contributed to our significant growth and new ICL record sales and EBITDA.”
For the first quarter, sales jumped 67% year-over-year to $2.53 billion, up from $1.51 billion in the same quarter a year ago. Industrial product sales accounted for $494 million, potash sales totaled $795 million, phosphate solutions sales came in at $798 million, and ag solution sales were $566 million.
First-quarter earnings soared 345% year-over-year to $0.49 per share, compared to $0.11 per share in the first quarter of 2021. Analysts’ estimates called for $0.29 per share, so ICL Group beat earnings estimates by 69%.
Top Stock #9: MATX
Based in Honolulu, Hawaii, Matson, Inc. (MATX) is a leading transportation services company in the Pacific. Its fleet of containerships, as well as roll-on/roll-off ships and barges, haul vital commodities to not only Hawaii, Alaska and Guam, but also to Micronesia, the South Pacific, China and Japan. And its logistics business offers freight forwarding, warehousing, highway brokerage, rail intermodal and supply chain services.
Thanks primarily to a 139% surge in volume to China, Matson achieved blowout results in 2020.
For fiscal year 2020, Matson achieved total revenue of $2.38 billion and earnings of $193.1 million, or $4.44 per share. That compares to earnings of $1.91 per share and revenue of $2.2 billion in 2019. These results also beat analysts’ estimates for full-year earnings of $4.28 per share on $2.35 billion in revenue.
Now, it’s important to note that Matson has been in business since 1882, and during this nearly 140-year history, the company has continued to reward its shareholders handsomely. The company has paid a dividend for 169-straight quarters, or for nearly 41 years. And Matson has consistently increased its quarterly dividend. In the past nine years, its dividend has increased 53.3% to $0.23 per share, up from $0.15 per share in 2012.
I should add that the company crushed analysts’ expectations for its first quarter. The shipping company noted that demand was high for its expedited ocean services, as demand for goods also remained elevated. Even with the supply chain uncertainty and port bottlenecks in China in the near-term, Matson expects “a combination of the current supply and demand factors to remain largely in place through at least the October peak season…”
For the first quarter, Matson reported earnings of $339.2 million, or $8.23 per share, which was up 289% from $87.2 million, or $1.99 per share, in the same quarter a year ago. First-quarter revenue grew 63.7% year-over-year to $1.17 billion. Analysts were expecting earnings of $7.02 per share on $1.11 billion in revenue, so Matson posted a 17.2% earnings surprise and slight revenue surprise.
Top Stock #10: NET
With operations around the globe, Cloudflare, Inc. (NET) is one of the largest networks in the world, with about 25 million internet properties housed on its network. Simply put, Cloudflare’s online platform acts as a go-between folks’ internet requests and the servers housing these internet properties to ensure that folks are able to access websites and apps quickly and securely.
Interestingly, Cloudflare was initially founded in 2004 to uncover where email spam originated. Founders Matthew Prince and Lee Holloway developed a system that enabled IT teams to track spammers on their websites. Over the next few years, the system expanded to track even more malicious threats. Soon, they were looking for ways to protect against cyberattacks.
With cybersecurity solutions, though, came concerns about latency—which the Cloudflare team decided to face head on. Its efforts paid off. Not only did Cloudflare’s system provide protection against cyberattacks, but the detection and blockage of these attacks created faster loading speeds for websites. In fact, they were loading about 30% faster.
Today, Cloudflare has data centers in more than 200 cities around the globe to process all of these requests (an average 20 million HTTP requests per second!) and to offer security solutions to protect internet properties from malicious attacks. The company’s platform also helps companies minimize costs given that they don’t need to manage or integrate individual network hardware. So, it’s no surprise that the company has more than 3.2 million customers, including about 16% of the Fortune 1000.
Cloudflare added a record 14,000 paying customers in the first quarter, which brought the company’s total paying customer count to 154,109. Company management noted that its largest customers continue to grow bigger, spending more than $1.0 million per year. As a result, Cloudflare also achieved better-than-expected top- and bottom-line growth in the first quarter.
First-quarter revenue jumped 54% year-over-year to $212.2 million, topping estimates for $205.65 million. Earnings surged to $3.5 million, or $0.01 per share, compared to an earnings loss of $9.3 million, or a $0.03 per share loss, in the first quarter of 2021. Analysts expected earnings of $0.00 per share, so Cloudflare posted a whopping 100% earnings surprise.
Looking ahead to the second quarter, Cloudflare expects revenue between $226.5 million and $227.5 million. Earnings are expected to range from a per share loss of $0.01 to $0.00 per share. The current consensus estimate calls for earnings of $0.00 per share on $217.87 million in revenue.
And for its fiscal year 2022, Cloudflare anticipates revenue between $955 million and $959 million, and earnings per share between $0.03 and $0.04. That compares to an earnings per share loss of $0.05 and revenue of $656.43 million in fiscal year 2021.
Top Stock #11: NRT
Back in 1975, North European Oil Royalty Trust (NRT) was formed to manage royalties from the German subsidiaries of Exxon Mobil Corporation and Royal Dutch Shell. The trust holds the royalties, which are paid on a quarterly basis and derived from natural gas, oil and sulfur sales in northwestern Germany.
For its second quarter in fiscal year 2022, total royalty income soared 169.5% year-over-year to $3.77 million, up from $1.40 million in the second quarter of 2021. Second-quarter earnings surged 197% year-over-year to $3.56 million, compared to $1.2 million in the same quarter a year ago.
North European Oil Royalty Trust also announced a 171.4% increase in its distribution. The trust will now pay $0.38 per unit, up from $0.14 per unit in the second quarter of 2021. The second-quarter distribution was paid on May 25 to all unitholders of record on May 13.