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Last Updated on October 2, 2021

For all those who have been in stores lately, they could see prices of commonly purchased goods and services rising. In recent months we can see that inflation rates year-over-year have grown over 5%. The Core Consumer Price Index rose to 4.5%. Due to high inflation, many investors are considering the best stocks to buy in high inflation which we will cover soon.

The buying power of cash is being eroded faster than it has been in over a decade. The last increases in inflation that were this high happened back in 2008. On the graph below you can see current inflation rates.


source: tradingeconomics.com

But do not panic yet! The stock market provides a solution for this case as well. Choosing value stocks as investments would allow you to take advantage of potential long-term share price appreciation, as well as collect a dividend payout. Moreover, the vast majority of value stocks are profitable and have time-tested operating models.

But this is just one of the best ways to hedge against inflation. You can use various other instruments to do that which will not be covered in this topic.

The following value stocks would be perfect to help investors beat inflation. The list is only informational. Make sure to do analyses and investment decisions for yourself.

Johnson & Johnson

Conglomerate Johnson & Johnson is one of the world’s largest healthcare companies, with annual revenues in excess of $80 billion. It is important to add that company holds a high AAA credit rating from Standard & Poor’s

Johnson and Johnson‘s largest business is pharmaceuticals accounting for 55% of the total revenue. The second and third-largest source of income is from medical devices and consumer healthcare which make up about 25% and 20%. These operating segments have worked together flawlessly to push Johnson & Johnson’s adjusted operating earnings higher every year.

Another thing Johnson & Johnson is famous for is acquisitions. The company recently acquired medical device companies bringing robotics and data science to the operating room. In 2019, it acquired both Auris Health and Verb Surgical. This certainly can’t hurt the company’s future earnings.

The business is well diversified which provides great stability in all economic cycles. The company has managed to pay dividends continuously for the past 59 years. Johnson & Johnson’s 2.6% yield and share price appreciation potential should be more than enough to put inflation in its place.

The Procter & Gamble

Procter & Gamble is a firm with more than 100,000 employees that produces and sells consumer packaged goods. Some of the famous brands owned by the firm include Head & Shoulders, Rejoice, Olay, Old Spice, Safeguard, and many others. The firm is a solid bet in times we see higher inflation as it markets essential products and has an international presence.

Revenue from consumer staple giant increased by 7,3% in the last financial year and currently it pays out dividends of 2,5%.

Procter & Gamble’s valuation is also important, so investors should note that PG has a P/E ratio of 25 right now. Comparing with the industry average P/E of 23.98, it can be concluded that P&G is selling at a premium price.

In recent years, cash flow keeps rising which can be expected in the near future as well. However, during the growth of this giant, there may be irregularities with regard to commodity pressures that it currently encounters.

McDonald’s

Another strong business that found itself in the top position in best stocks to buy in high inflation is the famous McDonald’s. McDonald’s seems to have returned to 2019 levels with revenue and net income. Revenues are expected to be $23 Billion by the end of 2021.

McDonald’s has a strong brand name. Nearly 70 million people visit one of its stores every day. The company has 39,198 restaurants and more than 90% are franchise-owned.

Many investors see McDonald’s fast-food business as very competitive and highly saturated. In addition, with the emergence of new trends and increasing interest in a healthier diet, it just feels as if McDonald’s faces too many challenges.

However, McDonald’s is successfully fighting through new emerging trends, thus imposing new healthier drinks and food that satisfy the newer generation as well. Additionally, in the last 12 months, Mcdonald’s expects to increase revenue that will surpass levels from 2019.

Either way, Mcdonald’s looks like a good business at this time. No wonder, given the strong brand that has had a constant dividend payment since 1976. Sounds like the perfect company for conservative and diversified investment.

Colgate-Palmolive Company

Colgate-Palmolive Company is a company that came fourth on my list of the best stocks to buy in high inflation. The company provides health and personal care products. It has an amazing Brand recognizable in the whole world and the huge pricing power that comes with it.

The company has a nice dividend yield of 2,4% at the moment. Revenue has been growing constantly for the last 5 years. The free cash flow received by investors regularly follows revenue and is increasing every year.

Stable free cash flow provides opportunities to invest in various product segments. With more cash in the bank, the company can invest in new technologies and new products segments. This should open a window of opportunity for Colgate-Palmolive in other product categories.

Morgan Stanley

Morgan Stanley is one of the world’s largest investment banks and financial services companies.

The company has healthy organic growth, is hitting its financial targets, and has a dividend yield of 2,9%, low PE ratio of 13. Analysts expect Morgan Stanley to beat the earnings estimates this year, while revenues fall short of expectations. The firm reported better than expected results in the first quarter of 2021, with positive revenue growth across all businesses. This is the main reason why this company found its name on my list of the Best Stocks To Buy in High Inflation

Moreover, there is greater demand in the financial world. Especially, demand for new products has been high, and Morgan Stanley has international expansion opportunities as well.

Morgan Stanley’s CEO James Gorman said that “Morgan Stanley has accumulated significant excess capital over the past several years and now has one of the largest capital buffers in the industry. The action taken by the Board reflects a decision to reset our capital base consistent with the needs we have for our transformed business model.”

The bank said in a press release that its dividend will rise to 70 cents a share starting in the third quarter of 2021 and that it would buy up to $12 billion of its own stock through June 2022.

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