7 Best Stagflation Stocks to Buy

Stagflation is no barrier to these seven stocks.

In May, the U.S. consumer price index gained 8.6%, its highest inflation growth reading since 1981. The S&P 500 has been pressured in recent weeks as investors grow increasingly concerned that the Federal Reserve will be unable to get inflation in check without triggering a U.S. recession. High inflation coupled with slowing economic growth creates the economic condition known as stagflation, a historically bearish environment for stocks. But not all stocks suffer during stagflationary periods. These seven buy-rated stocks have outperformed during past periods of rising inflation and below-average economic growth, according to Bank of America analysts.

Kroger Co. (ticker: KR)

Kroger is one of the largest pure-play grocery companies in the U.S. Even when prices are rising and the economy is tanking, Americans still need groceries. Kroger shares have averaged a 23.4% return during historical periods of stagflation, making the company the best-performing stagflationary stock among 148 members of the S&P 500 since 1968, according to Bank of America. In fact, analyst Robert Ohmes says Kroger is passing higher grocery prices through to customers, a dynamic that could help Kroger generate earnings upside. Bank of America has a “buy” rating and $75 price target for KR stock, which closed at $51.09 on June 10.

Hershey Co. (HSY)

According to Bank of America, stagflation has no impact on a shopper’s sweet tooth. U.S. confectionery leader Hershey is another top performer in stagflationary environments, averaging an 18.3% return during periods of elevated inflation and slowing economic growth. Analyst Bryan Spillane says Hershey has maintained sales growth momentum in 2022 despite difficult year-over-year comparisons. In addition, he says Hershey has raised prices across its product portfolio and has maintained a strong balance sheet that could help Hershey generate additional growth via bolt-on acquisitions. Bank of America has a “buy” rating and $240 price target for HSY stock, which closed at $213.35 on June 10.

Lowe’s Companies Inc. (LOW)

Not only has Lowe’s outperformed during periods of stagflation, the home improvement leader has also outperformed during the past two U.S. recessions in 2020 and 2008. Analyst Elizabeth Suzuki says the U.S. home improvement market will likely continue to slow coming off two years of record spending in 2020 and 2021. However, she still expects Lowe’s to generate positive revenue growth this year and says the stock offers investors an attractive return opportunity. Lowe’s has averaged a 15.3% gain during periods of stagflation. Bank of America has a “buy” rating and $292 price target for LOW stock, which closed at $186.33 on June 10.

Dover Corp. (DOV)

Dover produces specialized industrial products and manufacturing equipment. The stock has averaged a 12.3% gain in stagflationary environments. Dover’s pricing was up 6% in the first quarter, and management has guided for between 5% and 6% full-year pricing growth and 7% to 9% organic revenue growth. Dover has increased an average of 12.3% during periods of stagflation. Analyst Andrew Obin says supply chain disruptions in the second half of 2021 will help Dover expand margins in the second half of 2022. He says Dover is well positioned to manage rising raw materials costs and China lockdown challenges. Bank of America has a “buy” rating and $205 price target for DOV stock, which closed at $128.41 on June 10.

Schlumberger Ltd. (SLB)

It’s no surprise that shares of oilfield services company Schlumberger are up 59% year to date as of June 10. The Russian invasion of Ukraine has driven oil and natural gas prices to their highest levels in more than a decade. Analyst Chase Mulvehill says global energy shortages have given exploration and production companies a renewed sense of urgency to increase drilling and well completion activity, creating an extremely favorable environment for U.S. oilfield services companies and earnings upside for Schlumberger. Schlumberger has averaged a 12.3% gain in stagflationary environments. Bank of America has a “buy” rating and $55 price target for SLB stock, which had a closing price of $47.21 on June 10.

Abbott Laboratories (ABT)

Abbott Laboratories is a diversified health care products company that produces nutritional products, generic drugs, and diagnostic and medical devices. Analyst Travis Steed says there are plenty of reasons to be bullish about Abbott, including rebounding nutrition demand, ongoing COVID-19 testing sales and improving supply chains. Abbott also announced on June 4 that it is restarting its infant formula production at its Sturgis, Michigan, facility following a safety recall in February. Abbott has a strong balance sheet and has averaged an 11.8% gain during periods of stagflation. Bank of America has a “buy” rating and a $140 price target for ABT stock, which closed at $109.63 on June 10.

Pfizer Inc. (PFE)

In the past three years as of June 10, shares of COVID-19 vaccine maker Moderna Inc. (MRNA) and Pfizer’s COVID-19 vaccine partner BioNTech SE (BNTX) are up more than 700% and 950%, respectively. Pfizer’s stock is up just 37% in that same stretch, but the company’s portfolio diversification makes it an excellent defensive investment during periods of economic uncertainty. Analyst Geoff Meacham says Pfizer has a maturing internal product pipeline and the balance sheet strength to pursue key acquisitions to fuel growth. Pfizer has averaged an 11.6% gain during periods of stagflation. Bank of America has a “buy” rating and a $70 price target for PFE stock, which closed at $49.97 on June 10.

These seven stocks were unfazed in stagflationary periods:

— Kroger Co. (KR)

— Hershey Co. (HSY)

— Lowe’s Companies Inc. (LOW)

— Dover Corp. (DOV)

— Schlumberger Ltd. (SLB)

— Abbott Laboratories (ABT)

— Pfizer Inc. (PFE)

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7 Best Stagflation Stocks to Buy originally appeared on usnews.com

Update 06/13/22: This story was published at an earlier date and has been updated with new information.

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