As an investor, I’m always on the lookout for stocks to buy that can withstand market volatility and inflation. With inflation remaining stubbornly high, it’s essential for me to invest in companies that can maintain their pricing power and grow their revenue.
Household names
That’s why I’m going to buy Unilever (LSE:ULVR) and PepsiCo (NASDAQ:PEP). I see them both as inflation-resistant stocks that I believe can do well in these challenging times.
Unilever is a multinational consumer goods company that produces and markets a huge range of products. These include food, beverages, cleaning products, and personal care items.
Some of its well-known brands include Ben & Jerry’s, Dove, and Lipton.
Meanwhile, Pepsi is a global food and beverage company that produces popular brands such as Pepsi, 7UP, and Quaker Oats.
Both have strong brands for which consumers are willing to pay a price premium.
Unilever said it raised prices for its products — including Ben & Jerry’s ice cream and Dove soap — by more than 13% in the fourth quarter. That was the eighth consecutive price hike. And while this meant the company’s sales volumes shrank, it was by a lot less than prices rose. In fact, recent revenue growth at both companies beat analysts’ expectations.
A word from the wise
A brand is a powerful asset that can help companies navigate market volatility and inflation. As Warren Buffett once said: “A brand is a wonderful thing to own during inflation.” Unilever and Pepsi both have strong brands that people have a connection to. That makes them ideal investments in times of inflation, I feel.
However, like all investments, there are risks involved. For instance, despite their brand appeal, both will still face increased competition from cheaper, own-label goods. There’s also the risk of changing consumer tastes. And situations like when Cristiano Ronaldo famously wiped $4bn off Coca-Cola‘s market cap simply by making a barbed comment about Coke at a press conference.
Despite the risks, I believe Unilever and Pepsi are excellent investments for the long term. Both companies have a history of delivering consistent returns to their shareholders.
Additionally, they don’t require such heavy capital investments as businesses like railways or mining. This makes them even more attractive, as Buffett highlighted. “Brands are a promise in terms of what they’re going to deliver to you,” he said. In the case of Unilever and Pepsi, their brands have been built up over decades. And they live in people’s minds rent-free, representing certain ideals and qualities that keep shoppers coming back for more.
But it’s important to remember as well that both Unilever and Pepsi nurture their brands, investing in marketing and product innovation.
In my view, they’re two excellent examples of stocks that can withstand market volatility and inflation. As an investor, I feel they’ll deliver excellent returns to my portfolio in the long run. I intend to buy both of them as soon as I next have some spare capital to deploy.
