Inflation puts downward pressure on stocks as prices increase and dollars decrease.
Inflation has taken root in our current economy, and the signs show it won’t disappear overnight. Now is a better time to invest in stocks that have proven to withstand inflation and potentially even benefit from it.
- Inflation never benefits stocks unless you are one of the few companies that prosper with rising prices.
- Visa is one of the most extensive payment processing stocks, has rock-solid performance, and will undoubtedly benefit from inflation.
- Merck & Company Inc. is a large stock with solid dividends that will be one of the few beneficiaries of the growing inflation.
Joel Lim, Financial Analyst at Trading.Biz, has identified what he believes to be the best two stocks to invest in to turn the frustrations of inflation into solid returns this year. The best way to profit even during inflation is solid financials and consistent demand.
Visa and Merck & Company, Inc. are the perfect examples of services and products consumers will always need and can withstand inflation pressure.
Visa (V)
Visa is one of the largest payment processing companies and has been a leader in stock performance and market cap for decades. Visa and other payment network companies are prime examples of stocks that benefit from inflation.
Since Visa takes a percentage of customers’ transactions as profit, when inflation pushes prices up, Visa’s cut of every transaction also rises. While it may only be by a small number, the volume of customers and transactions means a sizeable difference in Visa’s profit.
Take last year, for example, when Visa reported 276 billion transactions. Joel Lim notes, “Visa’s current position in payment processing puts it in prime position to profit from the growing use of digital transactions and is seemingly unaffected by inflation.”
Visa has also had a long-term initiative to repurchase shares and attract investors with high profits per share. While they are not the cheapest, their decades of consistent growth and ability to withstand inflation make them solid additions to any portfolio.
Merck & Company, Inc. (MRK)
Merck & Company, Inc. is a significant player in the pharmaceutical sector, developing drugs to treat common conditions such as cancer and shingles. It is an outstanding inflation protection stock because it has an excellent track record and is positioned for future growth. It has products that will always see demand.
Merck & Company did not have the most exciting year in 2023 but has garnered much attention and is expected to see a significant comeback in revenue growth this year. The company’s anticipated cancer drug Keytruda will primarily drive the stock growth.
Joel Lim adds, “Merck & Company is one of the only companies resisting regulatory headwinds in the pharmaceutical market and still producing consistent income and increasing yearly dividends.” Dividend investors and those looking for excellent long-term stocks should look no further.
Merck & Company has proven its resilience to inflation and demonstrates enticing growth potential, with several sure-to-be-hit drugs coming down the pipeline soon.
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