The March CPI report left investors with a sour taste. The index soared for the third consecutive month, with a 3.50% year-over-year (YOY) increase that surpassed analyst expectations and represented a 30 basis point increase from last month. Hence, with the stickiness of inflation, the importance of inflation-proof stocks increases.
Furthermore, with inflation persisting, investors are recalibrating their expectations for interest rate cuts starting in June. Hence, with the prospect of rate cuts pushed further into the future, picking up inflation-proof stocks has become imperative. With that said, here are three that perfectly fit the bill.
Walmart (WMT)
Walmart (NYSE:WMT) is a leading big-box retailer known for its affordable prices. Over the years, the company has successfully weathered numerous economic cycles, consistently growing its top-and-bottom-line. Its resilient business model was on full display last year, where its revenue growth of 6% comfortably surpassed its 5-year average by more than 30%. Likewise, its EBITDA growth was 9.60%, beating the 5-year average by 216%. These results come at a time when the U.S. experienced its worst inflation since the early 1980’s. WMT stock followed suit, delivering a 21% gain last year.
Furthermore, the company has been experimenting with higher-end goods, potentially attracting wealthier customers and broadening its reach despite the economic pressures. Moreover, its fourth-quarter (Q4) report showed global eCommerce sales rose by 23% YOY while advertising sales shot up an incredible 33% YOY. Also, the firm hiked its dividend by 9%, the highest bump in over a decade.
Visa (V)
Visa (NYSE:V) is a fintech juggernaut. It empowers its mammoth user base with credit and debit cards and offers incentives such as cashback, points and travel rewards. To illustrate the power of Visa’s business, the company processed 212.6 billion transactions on Visa’s networks in 2023 last year, up from 192.5 billion in 2022.
Furthermore, it has operated an incredibly efficient business, boasting over a 95% gross margin in the past several years. Its robust profitability is mainly driven by its powerful role as a payment network, avoiding the costs and risks of credit lending. With minimal operational costs and a scalable model, the company earns hefty fees from its global transactions.
Recent results have been excellent for the business, with consumer spending holding up well. The firm reported a 9% jump in sales on a YOY basis during the first quarter, while net income rose by 17% YOY, bringing its net profit margin to 56.6%.
Applied Materials (AMAT)
Applied Materials (NASDAQ:AMAT) plays a critical role in advancing the burgeoning artificial intelligence (AI) realm. It’s a top equipment, services and software supplier needed to develop semiconductors. Advanced chips are required to power AI applications and AMAT benefits from this secular trend. Consequently, in the past year, AMAT stock has delivered roughly an 84% gain, which trumps the S&P 500’s 25% gain.
One of the most attractive aspects of AMAT is its robust profitability position. For instance, its 5-year net income and free cash flow margins are at 23% and 15%, respectively, comfortably surpassing industry benchmarks and historical averages. Also, its return on common equity is at a stellar 46%, which means that for every dollar of equity owned by its shareholders, AMAT generates 46 cents in profit.
Hence, with the enduring demand for cutting-edge semiconductors, AMAT is positioned incredibly well for long-term expansion, making it an excellent option among inflation-proof stocks. Moreover, it also offers a relatively attractive dividend, growing its payout for the past six consecutive years.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines