The highest inflation in over 40 years is hitting consumers and rippling through the economy right now, but I don’t have to explain that to you. If you shop for anything these days, you know where prices are heading and that is up, way up.
It’s obvious by now that the Federal Reserve got it wrong when they said that inflation was “transitory” and now we are all in a mess. There really is no end in sight right now for when inflation will wane and prices will return to a manageable level. No one knows the actual date and time. Since we don’t know, there is another way you can look to offset rising prices…maybe. The answer might just be to make some money by investing in inflation stocks when inflation is skyrocketing!
Invest in Inflation Because It’s Going Up!
That line above about investing in inflation used to get a few laughs from anyone I said it to, but that was before record-breaking retail prices became so dramatic. But the truth is that inflation and higher prices are a vicious cycle and much of it is fed by the ability of businesses themselves to increase their profits during such a cycle.
I am not saying that inflation is all caused by business and its desire to pad profits, but business can see what is happening and they are certainly not above taking advantage of the situation. That means when prices are going up due to legitimate reasons like supply chain and labor issues, they can add some profit to the pain by increasing margins too. After all, are you going to dissect the reasons why the price of a pound of ground beef goes up 6.0% and not just 3.4% because of any of the real issues?
We aren’t able to see the small details and business knows that. Hence, that extra spike in the cost goes as just part of the inflation cycle. I’m not making this up folks, it’s the way it is.
When You Can, Why Not Defend Your Wallet by Investing?
Now I’m not a financial advisor, but if you had to pick one area where inflation affects the most people every day and those people had very little control over it, you’d probably pick the food category to examine. There’s no escaping it: we all have to eat and we all spend money every week on food. The food industry, from farm equipment to packaged food, grocers, and restaurants, all are out there just waiting for you to recognize an opportunity to fight inflation by investing!
Here are some facts courtesy of the Bureau of Labor Statistics. At-home food costs climbed 8.6% (and out-of-home costs rose 6.8%) in February from a year ago. The cost at home was higher than the overall 7.9% inflation growth in total.
Wholesale prices are up even more, signaling continued inflation at supermarkets and restaurants. The producer price index for food was up a whopping 13.4% in the year ended in February, with grains and the beef and veal category rising 20% or more.
In reacting to this surge in food costs, Wall Street has stuck with its usual language about the struggles of big business during these difficult times and that they are doing everything possible to end the cycle and control costs and retail pricing. And at the same time making all-time record profits too!
Some businesses, like restaurants and packaged-food companies, are absorbing price increases because they have been hit hard, it’s true. But farm-equipment makers, supermarkets, and food processors are actually benefitting from these circumstances. So if you want to invest, it begs the question, “what inflation stocks look best now as the targets?”
If You Have Cash to Invest, Strongly Consider These Stocks Now
I know that the market isn’t for everyone and certainly not for anyone who can’t afford to risk money that they might lose. That is the stock market in a nutshell. But despite the inflation cycle, Americans have increased their saving account balances to decade-level highs and many are now using that money in self-gratification that includes overpaying for experiences like travel and special events as well as wining and dining. They may just be trying to make up for what they have been missing during the pandemic in 2020 and 2021. We can understand that, can’t we?
But, if you are able, you may want to consider using your savings to buy depressed restaurant stocks. Investors may want to consider some stocks like Brinker International (EAT), Bloomin’ Brands (BLMN), and Starbucks (SBUX) and food industry giants like Kellogg (K), General Mills (GIS), and Conagra Brands (CAG) (makers of many iconic food brands like Vlasic, Birds Eye and Marie Callender’s). All of these stocks have dividend yields of more than 3% and are among the top investment items right now.
Even an old standby like Hostess Brands (TWNK) is one with better growth thanks to the popularity of Twinkies as a go-to stay-at-home snack. The stay-at-home trend has also benefitted companies like Hershey which has gained share in the sweet-snack category. These stocks project 2022 earnings and growth of 6% to 11% by stock experts.
Farm Equipment Too?
It just goes to follow that in order to have food, you have to grow it, and that means farm equipment must be in the picture. When it comes to planting, there are two main pieces of equipment to get crops in the ground: a grain drill and a planter. The grain drill is used to plant wheat and soybeans. The planter is used to plant corn.
The two leading companies in this field are AGCO and John Deere. They are both projected to be big winners in 2022.
AGCO is an American agricultural machinery manufacturer that designs, produces, and sells tractors, combines, foragers, hay tools, self-propelled sprayers, smart farming technologies, seeding and tillage equipment.
The brand name of John Deere (DE is the stock symbol for Deere & Company) is a manufacturer of agricultural machinery, heavy equipment, forestry machinery, diesel engines, drivetrains (axles, transmissions, gearboxes) used in heavy equipment, and lawn care equipment. It is listed as 87th in the Fortune 500 America’s ranking and was ranked 329th in the world. These are good investment choices to grow in 2022.
What About Your Friendly Supermarket?
Investors have warmed up to supermarket chains in the past year. Two such national chains, Kroger (KR) and Albertsons (ACI), are currently up 58% and 92% since last year.
That’s because during an inflationary cycle like this one, they widen their profit margins as they raise prices more than the increase in costs. Plus the consumer trades down to much more profitable private-label products that they sell. This makes these kinds of companies really good targets for investment right now.
I know that there is still resistance by many about investing in the stock market. I also know that not everyone can afford to do it. But think of this for a second.
Investing has changed dramatically since the last century ended. By that I mean that it is easier and less costly to buy and sell, mainly because of the use of the internet and web services, but also because the information is so easy to access about any given stock, company and/or its trends. You can even buy fractions of stocks these days to minimize any one investment and its risk. And many institutions and apps allow you to make free trades.
The important thing to remember is that everyone needs some alternate stream of income to survive and prosper, inflation or not. For many, it’s a second job or a side gig of some sort. If you are not selling a product to survive on the side, use your energy and start investing.
If you invest in a retirement plan at work, then you already believe that investing is a good way to build wealth so why not think about it as an add-on to your income stream too, especially when money is tight and inflation is growing.
Are you looking for a way to beat inflation? Is investing in inflation stocks appealing to you as a way to defend your wallet? Are you in a position to take that kind of risk?