Today, a dollar doesn't pack the same value it did 10 years ago. That's because of inflation. And as you might have noticed, nowadays it's getting out of hand. The Labor Department's latest numbers show the consumer price index rising 7.5% in January, the highest reading in 40 years.
This increase doesn't just hurt the average consumer, who isn't earning 7.5% more than a year ago - it also hurts investors. Most aren't positioned well enough to reap the rewards of rising prices.
But there is an upside to inflation: A number of businesses actually benefit from rising prices. And Money Morning's Chief Investment Strategist, Shah Gilani, has found two such businesses that any investor would be wise to invest in.
So, to help you position your portfolio in a way that capitalizes on times of higher costs, here are two inflation stocks to buy now.
Right now, food inflation is hitting the United States hard. Some recent data shows that food prices are 7.4% higher than they were this time last year.
Yet rising prices haven't changed buying habits.
That's not because consumers don't know what's happening. In fact, an in-house study performed by Walmart Inc. (NYSE: WMT) - Shah's first inflation stock to buy - shows that customers are aware of rising prices and inflation. They see it in stores and on the news but keep doing what they've always done.
This matters because it affects Walmart's bottom line.
The Arkansas-based retail giant reported stronger-than-expected fourth-quarter earnings and record U.S. revenue - all during major supply chain issues and inflation.
Adjusted earnings for the quarter came in at $1.53 per share, rising 4.8% from the same period last year. That's just ahead of Wall Street's forecast of $1.50 per share. And revenue for the quarter was $152.9 billion, beating out analyst estimates of $151.6 billion.
To top it off, U.S. same-store sales rose 6.3% from the same period a year ago - hitting $100 billion for the first time.
Those are some pretty solid numbers.
With rising rates on the way and the ongoing Russian invasion of Ukraine, investors will continue to move out of risky tech stocks and into more reliable mega-caps stocks - just like WMT.
The concerns over rising rates have the tech industry reeling - along with the rest of the Nasdaq. The Dow and the S&P 500 are both undergoing wild swings, up one day and down the next.
Not to mention the Russia-Ukraine conflict, floods, droughts, and wildfires...
All this to say that the pressure is on grain farmers everywhere. And this pressure is driving a particularly painful kind of inflation: an increase in food prices here in the United States.
That's why Shah's turned to the agri-foods sector for a fantastic inflation stock opportunity.
Archer-Daniels-Midlands Co. (NYSE: ADM) is a $42 billion multinational company that you ought to consider.
Not because it's one of the biggest grain traders in the world.
Not because it's more than a $40 billion market cap company or because its revenue is $85 billion.
Not because it pays a 2.11% dividend - and that's before raising it by 8% this quarter.
While these are all great reasons, at the end of the day, you should want to own shares of this company because of its stellar performance.
And the thing that Shah Gilani likes most: Archer-Daniels-Midland Co.'s ability to expand its profit margins throughout inflation: "In this inflationary environment, you want a stock that's representative of a company that can expand its profit margins as we go forward, if inflation increases."
And ADM is able to do just that.
Last quarter, the company increased its profit margin; many other companies are going the other way. About 77% of them have reported better-than-expected revenue and earnings, but many aren't beating the five-year averages. That signals profit margin compression.
This isn't the case for ADM, whose profit margin is up 31%.
And because of the company's ability to grow, even during these turbulent times, that makes AMD one of the best inflation stocks to buy right now.
So, if you have $100 to invest with, Shah suggests buying up shares of ADM to pad your portfolio for these inflationary times.
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