I’m really excited. For the first time in 20 years I am doing my Investing and Trading Summer School. And as I prepare for it, I am thinking on how to make money from the current and future investing environment. By the way you can find out about the Summer School at www.alpeshpatel.com/spain
Stocks You Should Buy During Periods of Stagflation – which are they?
In today's economy, stagflation is being discussed more frequently. This is because we are witnessing inflationary pressures in several parts of the world while growth rates are stagnating.
Stagflation occurs when there is a combination of high inflation and slow economic growth. This results in a decrease in purchasing power and rising unemployment rates. Such an environment can be difficult for businesses since they have to grapple with both high costs and low demand.
However, certain stocks tend to do well during periods of stagflation. Here, we will take a look at some of the best-performing stocks during stagflation periods.
Which sectors and stocks do well in periods of stagflation?
Stagflation is likely to have a different impact on various businesses. When looking for stocks to buy during stagflation, it is important to consider companies that are less likely to be impacted by the decrease in purchasing power. These companies should also be able to benefit from the slow economic growth.
Here are some of the best stocks to buy during periods of stagflation:
Food and beverage companies
Food and beverage companies can increase prices without seeing a significant decline in demand. This is because people still need to eat, even during periods of economic hardship. These companies also have low production costs, which gives them a competitive advantage. But it’s the companies which are not discretionary food items which are sensitive to demand.
Some of the best food and beverage stocks to buy during stagflation include Nestle (NSRGY), Coca-Cola (KO), and PepsiCo (PEP). These are so diversified that yes you may cut back on some of their products, but they still get you on the other products.
Healthcare companies
Healthcare companies are also relatively immune to the effects of stagflation. This is because people will still need medical care, even when the economy is struggling. Furthermore, healthcare companies have strong balance sheets due to the high barriers to entry in the industry.
Some of the best healthcare stocks to buy during stagflation include Johnson & Johnson (JNJ), Pfizer (PFE), and Merck & Co. (MRK).
Utility companies
Utility companies are seen as defensive stocks since they provide essential services that people need, regardless of the state of the economy. These include electricity, gas, and water. These companies also have stable cash flows and can weather tough economic times.
Some of the best utility stocks to buy during stagflation include American Electric Power (AEP), Duke Energy (DUK), and Southern Company (SO).
Gold miners
Gold miners are another type of stock that does well during periods of stagflation. This is because gold is a safe haven asset and people tend to invest in it when the economy is struggling. Gold prices also rise when inflation is high.
Some of the best gold miners to buy during stagflation include Barrick Gold (ABX), Newmont Mining (NEM), and Goldcorp (GG).
Which sectors and stocks should you avoid during periods of stagflation?
While there are some sectors and stocks that do well during periods of stagflation, there are others that should be avoided. These include companies that rely on consumer spending, as well as those with high production costs.
Some of the sectors and stocks to avoid during stagflation include:
Retail companies
Retail companies are often impacted negatively by periods of stagflation. This is because people have less money to spend when the economy is struggling. Many retail companies also have high production costs, which makes it difficult for them to compete when inflation is high.
Banks
Banks are another sector that should be avoided during periods of stagflation. This is because they are typically impacted by the decrease in economic growth. In addition, banks often have to increase interest rates to offset the effects of inflation, which can hurt their profitability.
The Better Investment
For me it is not as black and white as stocks and sectors. We have to have a quick due diligence process that allows us to evaluate any company at any time for the best returns. That’s the basis of what I will be teaching in my summer school.
