Stubbornly high inflation creates opportunities within the stock market. That is precisely the environment we are currently within, with May inflation reaching 4.1%, well beyond the Federal Reserve’s 2% target. The Fed has chosen to pause rate hikes, likely out of fear of further banking turmoil, meaning inflation isn’t likely to be curbed anytime soon.
Traditionally, there are four classes of investments that tend to perform best dring periods of sustained inflation; commodities, consumer staples, inflation-indexed bonds, and real estate. We don’t cover bonds here, so they’re out. Real estate is too risky, it too is out. That leaves commodities and consumer staples stocks as the categories to consider. Here are three of the best stocks in these categories I think are worth buying right now.
Nutrien (NYSE:NTR) is a Saskatchewan-based company that provides potash, nitrogen, and phosphate to its customers. Those products are necessary for the agriculture and livestock industries. In other words, the company plays an integral role in our food supply chain.
Thus, as food prices rise, so too does demand for supplier inputs like potash, nitrogen, and phosphate. These minerals are basically the most essential to human survival. That may be a bit of an overstatement, but Nutrien’s business model is one that’s pretty straightforward to understand.
Nutrien has dealt with a lot of volatility over the past year, as the war in Ukraine has provided opportunities, but also unforeseeable issues. The company saw crop nutrient sales boom, as Ukraine exports were choked by the war. However, prices then decreased as factories stabilized in response to the outbreak of war.
Here’s the point as it relates to NTR stock. The company is stabilizing, despite slightly lower EBITDA projections for 2023. That isn’t particularly positive news. But NTR stock has nearly $20 of upside beyond its current price, if the analysts are correct. Additionally, this company has established itself as a global commodities behemoth, something that can protect investor portfolios against inflation. Thus, for those thinking we may have more hefty prints ahead of us, this is a name to own.
Albemarle (ALB)
Albemarle (ALB) logo on a mobile phone screen
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Albemarle (NYSE:ALB) stock provides a rollercoaster ride for risk-seeking commodities investors. The last few years have proven as much, with investors seeing the valuation of this lithium producer more than triple. At its peak-to-trough high, ALB stock managed to quadruple in less than two years.
That rise is the product of the boom in EV sales. Lithium is heavily used in EV batteries, and thus its price is tied to demand for EV batteries. Lithium went from $10,000 per metric ton just before the pandemic to $90,000 per metric ton by November 2022. This price then fell to $24,000, but has since moved slightly higher and appears to be stabilizing.
Insider buying by CEO Kent Masters in early May provided reason to believe that shares of ALB stock should rise. Indeed they have, moving from $181 to $227 per share since he initiated his position May 5. There’s reason to believe ALB shares should logically move higher.
For one, EVs have reached a mass adoption tipping point, and there’s no turning back now. Two, pure metrics-based sites including Gurufocus believe ALB shares could more than double from current prices based on quantitative factors alone.
Exxon Mobil (XOM)
XOM Stock Is on the Way Back, but It Will Take Some Time
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Exxon Mobil (NYSE:XOM) stock continues to move higher, though it has cooled somewhat over the past few months. That stagnation is likely an opportunity for investors to buy, particularly those concerned about inflation remaining stubbornly high. Exxon Mobil’s commodity of choice, for investors who don’t know, is oil.
Exxon Mobil produced a record $55.7 billion in earnings in 2022 and $77 billion in cash flows. High oil prices were clearly very kind to the company. However, as we’ve seen in recent years, energy has been among the most volatile commodities out there. Thus, it’s been notoriously difficult to predict which direction oil will move, based on a myriad of supply and demand factors.This year has shown as much, with investors backing away from XOM stock, due to a range of generally bearish macro conditions.
But Exxon Mobil is hedging its bets. It is leaning into lithium production, and secured drilling rights to sites in Arkansas in May. Exxon’s European counterparts have long been shifting toward a greener future and investing more heavily into such technology and energy sources. Lithium is clearly a huge growth sector due to its importance in EV battery production, and the future iterations of batteries to come.
Thus, XOM stock may appear more diversified in the minds of many investors, and still offers upside to the price of oil, for those worried about inflationary forces.
PepsiCo (PEP)
Cans of PepsiCo's Pepsi soda are in a bucket of ice.
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PepsiCo (NYSE:PEP) has become a household consumer staples stock which investors should consider right now. Inflation remains high, growing 4% in May, but consumers have become habituated to paying high prices.
That’s a boon for Pepsi, which sells a startlingly high number of the snack brands that populate that aisles of supermarkets. Those brands include Lay’s, Doritos, Miss Vickie’s, Fritos, Cracker Jack, Pepsi, Mountain Dew, and more.
Pepsi has been the beneficiary of very strong demand in 2023. Notably, despite higher prices in the first quarter, revenues grew by more than 10%. The first quarter is now behind us, and the markets are always concerned with current news. Accordingly, I’m not sure what Pepsi’s Q2 revenues will look like, but speaking anecdotally, I’m guessing they’ll remain strong. I say that because snack prices remain elevated.
If Pepsi retains its pricing power, this stock has real inflation-fighting credibility worth considering.
Walmart (WMT)
Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
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Walmart (NYSE:WMT) is known for low prices, and has been able to charge these every day low prices due to the massive pricing power it exerts due to its scale. Those low prices act as a beacon to bargain shoppers. That truth should only become more evident in the coming weeks and months.
Walmart already saw sales increase by 7.6% during the first quarter, with operating income improving by 17.3%. Consumers are increasingly spending their weakening incomes at Walmart. Additionally, the company is also drawing higher-income shoppers, who may have avoided this big-box retailer in the past. That fact suggests that demand is increasing across the board, something that should continue to benefit Walmart overall.
Beyond those encouraging statistics, Walmart is also continuing to improve its position against its chief rival, Amazon (NASDAQ:AMZN). Walmart’s e-commerce division grew 26% on a global basis in the first quarter. Walmart isn’t satisfied with being the world’s largest retailer, and clearly wants to dominate digital retail as well. Thus, in this inflationary environment, this is a stock that has some real ability to continue growing.
Barrick Gold (GOLD)
How to Play Barrick Gold Stock Ahead of Today's Earnings
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The thinking with investing in Barrick Gold (NYSE:GOLD) stock as inflation rises is simple. People have lost trust in the U.S. dollar and other national currencies. Gold has been a store of value for thousands of years, far longer than any national currency. It has proven to be a reliable store of value during for millennia, so investors return to the yellow metal when fiat currency weakens in value due to inflation.
Investors also turn to firms that mine the precious metal. And Barrick is among the biggest in the space.
How GOLD stock moves from here will remain difficult to predict. That said, shares of this top gold miner peaked above $29 per share during the pandemic as similar concerns plagued the economy. It now trades around the $16 level, and is near its recent lows.
Gold stocks don’t move based on easy-to-predict factors. But Barrick Gold operates the largest portfolio of Tier One gold assets in the world. Tier One assets are those that have the highest lifespan classification and gold production expectations.
Mondelez International (MDLZ)
The Mondelez website magnified by a magnifying glass
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Mondelez International (NASDAQ:MDLZ) is a lot like Pepsi. Both snack companies are riding high, as demand has not cooled even as producers push higher prices onto customers.
Its revenue growth was even greater than Pepsi’s during the first quarter, coming in at 18.1%. Organic revenues (those from existing operations) grew at an even higher rate of 19.4% on a year-over-year basis.
The company’s second quarter is projected to be strong, again based on anecdotal evidence, admittedly. Trsicuits, Wheat Thins, and Ritz crackers all remain expensive, pointing to sustained demand amid higher prices.
Mondelez International has been successful in its rebrand from its former Kraft name. In fact, it has been so successful in that effort that it has inspired other firms, namely Kellogg’s (NYSE:K) in spinning out their snacking business. Kellogg’s will reportedly rebrand its snacking business as Kellanova by the end of 2023. That success suggests Mondelez international will remain a strong investment, especially as consumer staples stocks muddle on during inflationary times.
On the date of publication, Alex Sirois 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.comPublishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
