Another UK inflation reading has come in. And it proves the persistent cost pressures that FTSE 100 companies have long reported. In September, UK’s prices continued to rise fast again. At 3.1% on a year on year (yoy) basis, the number is marginally lower than the 3.2% seen last month. But that is little comfort.
This means, that we should continue to brace for higher prices that could impact the UK’s companies even more. But there are at least three FTSE 100 stocks that could remain immune, or near immune, to the impact of higher prices.
FTSE 100 pharmaceuticals immune to inflation
One that I like for my investment portfolio is the pharmaceuticals biggie AstraZeneca. Before the Anglo-Swedish firm became synonymous with the Covid-19 vaccine last year, the company was best known for its cancer treatments. And these still continue to be a big source of revenue for the company.
Since patients suffering from cancer are likely to use these drugs even with marginally increased prices, the FTSE 100 stock is relatively insulated from the inflation challenge. I reckon it can pass on increased costs to keep its ship in order. Of course, for the same reason, its demand does not rise the same way either when inflation is low. But as an investor in AstraZeneca, I can live with that.
In the same vein, I would also consider buying Hikma Pharmaceuticals, which as the name tells us, is also a pharmaceuticals company. The FTSE 100 multinational focuses on producing non-branded generic drugs. It is a financially healthy company, which is also seeing falling share prices right now.
Aspirational value makes Burberry a good buy
Another stock I like for my portfolio is the beaten down FTSE 100 luxury brand Burberry (LSE: BRBY). It needs little introduction. The pricey British brand has been around for over 150 years. It is particularly popular in Asia these days, which accounts for over 50% of its revenue. Because it has an aspirational value attached to it, I reckon that those who buy its products are not worried about the prices it charges. In fact, it may just be one of those brands whose desirability rises with its prices, unlike those selling essentials
Also, its multinational presence can balance the inflation risk. China’s consumer price inflation, for instance, was just 0.7% year-on-year in September, which is tiny compared to that in the UK right now. So, even if price sensitivity to its products exists, I reckon it may impact its Asian market less as consumers’ disposable income stays strong due to low inflation.
It has had some internal challenges recently, with the exit of its CEO, Marco Gobbetti but hopefully now that it has a new one ready to join next year, it could see some stability again.
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Manika Premsingh owns shares of AstraZeneca and Burberry. The Motley Fool UK has recommended Burberry and Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.