Inflation rates in the United States have accelerated to 7.5% and are at the highest levels since 1982. So, investing in stocks that protect against inflation can be one of the best ways to hedge one's money in these volatile times. Moreover, some stocks fall in the rare category of being a good hedge against inflation and performing well when the market is recovering from a crisis. As a result, these can offer a fantastic opportunity to the investors looking to outperform the inflation levels.
JPMorgan Chase
JPMorgan Chase (NYSE: JPM) is one of the oldest and largest banks in the country that offers a range of services, starting from checking accounts to investment banking. This banking conglomerate is known for its solid fundamentals and, just like other regional banks, is in a perfect position to benefit from the hikes in interest rates.
Though a lesser portion of its revenue comes from the net interest income, the company still can benefit significantly from it. In the fourth quarter of 2021, the company’s revenue consisted of $13.7 billion from net interest income and $16.6 billion from non-interest-based services like investment banking validates its massive opportunity.
Moreover, the higher revenue generated from the increased interest rates will further strengthen the company’s bottom line and cast a positive impact on its earnings per share. Besides, the stock also provides investors with a dividend yield of 2.59%.
Federal Realty Investment Trust
Federal Realty Investment Trust (NYSE: FRT) is a REIT with robust fundamentals and a strong balance sheet. The REIT has been making strategic acquisitions over the years and has successfully increased its property portfolio from 85 real estate projects in 2010 to about 105 at the end of 2021.
This REIT’s business model of paying out 90% of the earnings as dividends makes it a great source of constant cash flows to its investors. The best part is even during the pandemic, when it had to face an unprecedented disruption in its business due to the countrywide lockdowns, the REIT remained firm in such a situation and maintained the regularity of its dividend payouts.
Moreover, the fact that FRT has been able to increase its dividend payouts for the last 54 years consistently and intends to keep doing the same in the coming years as well makes it a perfect buy at all times.
Adobe
Adobe (NASDAQ: ADBE) is primarily a digital content creation software company with a software-as-a-service-based subscription model. It has portrayed rock-solid growth in the past and has sustainable debt levels.
The company has survived inflationary times like a pro and is a highly reliable stock to invest in right now. As Adobe is sitting on tons of cash and free cash flows and does not necessarily have to raise debt, it is much less vulnerable to the rising interest rates of the market.
Moreover, as many organizations are heavily dependent on its cloud-based software suite, the company has got quite some pricing powers that can help it in shielding itself during uncertain times. Adobe’s growth rate might have slowed down these days, but it is indeed making more money than ever.
The stocks mentioned above have a defensive business model that excels when price levels are on the rise. So, as the Federal Reserve keeps raising its interest rates this year, it will bode well with these companies to derive higher revenues from the increased interest rates. So, those looking for some investment options can consider any one or more of these for their portfolios.
Related: Equity Indices Including S&P 500 Remain Vulnerable as Inflation Near 40-Year Highs