Should You Consider Stocks With Pricing Power Amid High Inflation?

The list had large-cap names like Proctor & Gamble, Nike, Oracle, and PPG Industries. Goldman Sachs also identified several small-cap stocks including KB Home, Weber, Brinks Company, Green Plains, and Evoqua Water Technologies. Taylor said he believes margins can go “significantly higher” over the long term, given the company’s leverage to both necessary and elective procedures, which should return quickly in a post-pandemic world. “DHR sales engine is able to proactively identify areas of potential pricing pressure and [successfully] navigate customers to high-value product,” Sourbeer wrote. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. We’re not going to see TV shows getting 40 million viewers, 30 million viewers regularly like we may have when we had three networks back in the day when I was a little boy in the ’70s.

• In this case, if the company raises its prices, the increase may not affect demand because there are no alternative products on the market that consumers can choose instead.
• A high-inflation regime will benefit stocks of companies that can easily pass on price increases to consumers, a team of UBS strategists led by Keith Parker wrote in a September 28 note.
• The company’s Greater China operations are also on track for a recovery in 2022.
• I would also like to welcome the newest affiliate to the Motley Fool Money family of radio stations, WPMO in Pascagoula, Mississippi.

All of this is to say that GNRC looks like an ideal choice for investors looking for stocks with purchasing power. Investors have seen NKE stock increase in price by 80% in the last five years. And the company has a dividend that it has increased for 21 years and is supported by, among other things, free cash flow (FCF) which hit almost $6 billion in 2021. While there are better choices for companies strictly looking to capture a dividend, Nike is a solid choice for investors looking for a solid combination of both.

Inflation is raging, but these 16 companies have pricing power

So the companies that can manage those problems might have a durable advantage. On Jan. 13, Guggenheim upgraded the stock from a “neutral” to “buy.” While Guggenheim thinks that the how to buy decentraland company still has challenges, it thinks that SolarEdge stock is a good buy at these prices. SolarEdge stock has fallen sharply amid the sell-off in renewable energy companies.

Over a multi-year timeline, he also thinks they’ll get a boost from higher tequila consumption outside of North and South America, as well as increased consumption of scotch elsewhere. Last year, India overtook France as the largest market by volume, according to the Scotch Whiskey Association. Get this delivered to your inbox, and more info about our products and services. Rising prices and inflation marked much of the first quarter of 2022 but some companies seemed to benefit despite the uptick. There are plenty more forward-looking inflation indicators that suggest further increases may materialize, Morgan Stanley analysts said in a research note. Parker only looked at companies that scored in the top 33% of their sectors, and picked companies that have “Buy” ratings and upsides of at least 10% to UBS analysts’ price targets.

• And companies with pricing power can raise prices without reducing demand for their products.
• Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed.
• His largest stock positions underperformed the market over the last 12 months by a large margin.
• “Supply chain bottlenecks, surging freight/shipping costs, rising input costs, and accelerating wage growth have intensified concerns about corporate margins,” Parker wrote.
• The list of high pricing power stocks has beaten the list of low pricing power stocks by 17 percentage points (+13% vs. -4%) since May 2018.

We don’t think any of the banking stocks have much of a pricing power. Coca-Cola, Procter & Gamble, Kraft Foods, and Johnson & Johnson may have limited market power. Warren Buffett clearly prefers stocks that are well managed over stocks with pricing power. Considering Warren Buffett likes to hold stocks forever, this makes sense.

Terms & Info

The analyst expects U.S. wireless capital expenditures to increase by around 10% to a record $35 billion this year and ramp up another 10% next year to nearly $40 billion. In contrast, spending has topped $30 billion a year in the past decade, Levi says. Thank SBA Communications (SBAC, $347.38) for the ability to access the internet, text or make calls on mobile phones and other wireless devices. The company owns and operates wireless infrastructure – cell towers, antenna placements on buildings and rooftops, distributed antenna systems and small cells (low-powered radio access nodes). Organized as a real estate investment trust (REIT), SBA has operations in the U.S., Canada, Latin America and South Africa. © 2023 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions.

The latter factor is a crucial one for companies, as Parker noted that a 1% increase in wages knocks roughly 1.2% off of S&P 500 earnings. In the past three months, annualized wage growth has jumped 35% for firms in the Air Freight & Logistics industry and 16% for restaurants. Protein prices are also coming down, he said, which will help boost the firm’s profit margins. He said this would allow the firm to commit more money to promoting their products. But some companies are countering the trend, by a combination of holding down expenses and raising prices for their products and services.

Pricing Power Deconstructed

Analysts at Credit Suisse have named a raft of U.S. and European stocks with pricing power to help investors navigate a world of rising inflation. There are always many factors that investors should consider before buying a stock, but in the current inflationary climate, the business’s pricing power may be one of the more important ones. In this segment of Backstage Pass, recorded on Jan. 14, Fool contributors Rachel Warren and Toby Bordelon discuss two companies that have insane pricing power right now and can keep winning for investors over the long haul. Insider breaks down Morgan Stanley’s 10 European stocks that will enjoy pricing power, which will likely be a tailwind in an inflationary environment.

Dividend Aristocrats may shine again if the Fed causes another bad year for the stock market

On Sunday, the LA Rams play the Cincinnati Bengals in Super Bowl 56. For companies looking to promote their products and services, 30 seconds of ad time is going for as much as $7 million. Here to discuss that and rsi divergence indicator more is Bill Shea, sports business writer from The Athletic, and he joins me now. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

In 2021, Tesla raised car prices multiple times amid rising input costs. In 2022, Tesla has increased the price of its FSD (full-self driving) subscription from $10,000 to $12,000. Brooker said a company’s ability to raise prices to cover rising costs might indicate that there are few substitutes for its products or services, or that it has a special competitive advantage. When companies face cost pressures – through higher prices for shipping and raw materials, for example – they have to choose whether to raise prices on their goods or services, or absorb the hit and let margins suffer.

UBS also identified stocks with pricing power.

“Pricing power should be an even more important theme for relative returns with surging shipping costs, rising raw materials, supply chain issues and accelerating wage growth,” UBS strategists wrote in a note to clients this week. “Inflation tends to benefit stocks as it rises because it allows companies to take price,” the bank’s CIO and Chief US Equity Strategist Mike Wilson said in a June 5 note. “As inflation declines, it becomes problematic for margins as pricing power declines while input costs are realized at a lag and come from a period when prices were higher.” Computer-aided design company Autodesk illustrates this group’s strength. The company has posted an average 84% gross profit margin over the past 5 years, more than double the average for the Russell 1000, and it ranks no. 5 in estimated margin growth this year in Goldman’s 50-stock basket. Autodesk’s shares have gained 19.2% year-to-date (YTD) and 13.2% over 12 months compared to the S&P 500’s 12.3% and 3.8% increases over the same respective periods.

After correcting by 30% from mid-May to mid-July, the 10-year US Treasury yield has catapulted 17% higher to 1.53% from 1.31% since September 20. “They just added a bunch of capacity, sales were up 20% in the last quarter, and now they’ve added 20% capacity for their next fiscal year,” Dreyer said. He said their narrow focus on the coffee and snack food spaces will drive their success. The firm just bought a coffee facility that will allow it to scale up production, he said.

North American E&P, Refining, and Oilfield Services

Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer. PepsiCo stock also has a low beta supported by a high percentage of institutional ownership. As of July 2022, over 71% of institutions held PEP stock in their portfolios.

For instance, on New Year’s Eve, taxi and car services significantly increase their rates because of the high demand for driving services. Hotels increase the rates for their rooms on dates close to locally hosted conventions as well as during major holidays when tourism is expected to increase. These are all instances where the pricing power of companies is strengthened because the demand will not be affected by price hikes. Goldman expects the outperformance of high-margin stocks to extend and intensify into the upcoming period, per the report. The list of high pricing power stocks has beaten the list of low pricing power stocks by 17 percentage points (+13% vs. -4%) since May 2018. Most of the high-margin stocks in Goldman’s group are in Info Tech, Consumer Discretionary, and Healthcare.

Looking at the recent uptrend in commodity prices and the expected supply-side disruptions amid the rising global cases of the omicron variant of the COVID-19 virus, inflation looks like it’s here to stay for some time. As a result, it’s important to look what is low liquidity at stocks with good pricing power. These companies can transfer the input cost hikes to buyers much easier than other companies. These ten stocks had a weighted average return of 17.6% since the end of 2009, underperforming the SPY’s 22.6% return.