When the going gets tough, I want to know that the shares I hold are resilient. That’s why I was drawn to a recent article from the financial experts at IG Group (LSE: IGG). They’ve identified three examples of potentially great stocks to buy as inflation runs riot.
Three tough cookies
Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!
Compass has staged a remarkable comeback from a pandemic that, thanks to the mass cancellation of events and gatherings, brought the company to its knees a couple of years ago. Client numbers are up and organic revenue growth is beating expectations. As IG’s experts note, the need to save cash could mean more trade for Compass as clients outsource.
Burberry has occupied a position in my portfolio for a while now and it’s hard to disagree that it’s one of the better retailers to buy in inflationary times. Put simply, anyone buying from Burberry is unlikely to be feeling the pinch. Also, I’m confident new CEO Jonathan Akeroyd’s experience should bring investors back once the economic clouds clear.
If anything smacks of defensiveness, it’s the pharmaceutical industry. So, the inclusion of Astrazeneca isn’t surprising. Following on from its Covid-19 vaccine success, the company is seeing good things from Enhertu — its new breast cancer drug. It’s not too dependent on any one part of the world for earnings either, meaning it should be able to handle ‘local’ economic shocks.
In a perfect world, I’d buy a set of stocks for a particular objective and they’d perform without fuss. Sadly, I can’t be sure such an outcome will occur. This is the eternal problem facing investors — what happened in the past might never ‘repeat itself’.
Investing in any or all three of the above certainly involves risk. Compass could be hit hard by rising wage costs. Burberry is heavily dependent on trading in China, whose economy has not been firing on all cylinders recently. At 19 times forecast earnings, AstraZeneca shares are pricier than industry peers. Is this premium truly justified?
Thankfully, I’m blessed with choice. These three are far from the only options of stocks to buy in the fight against inflation. Indeed, one alternative is to invest in businesses that benefit from the subsequent market volatility, such as IG Group itself! This is something I personally do.
To balance things out, I also funnel some of my cash into managed and index funds. These help to diversify my portfolio and ensure I don’t put all my eggs in too few baskets.
I simply can’t bet against shares
No one truly knows where markets will be at the end of 2022 and which particular stocks will hold their own. However, there is one thing I’m far more confident about: owning stakes in fundamentally great companies can really pay off if I can wait for confidence to (eventually) return. Academic research has consistently shown that equities generate the best returns of all assets over the long term.
Buying resilient stocks can really help but becoming a resilient investor is, I would argue, even more essential.
Stay the course, fellow Fools!