The last time inflation was this high, the IBM personal computer was less than one year old, and Dallas and The Jeffersons ranked among the most watched TV shows.
While the stock market was down back in early 1982, there were still some businesses that handled inflation pretty well. The same is true today. Here are three inflation-resistant stocks you can buy right now.
1. AbbVie
AbbVie (ABBV) already ranks as one of the largest drugmakers in the world. Market researcher EvaluatePharma projects that it could become the biggest pharma company based on prescription drug sales by 2028.
As you might expect, the use of prescription drugs isn't nearly as sensitive to inflation as most other products. AbbVie is able to pass higher costs along to payers relatively easily.
While the overall stock market has floundered so far this year, AbbVie's shares have soared. Investors have been attracted to its business stability, low valuation (its forward price-to-earnings multiple is under 11), and great dividend. The company is a Dividend King with 50 consecutive years of dividend increases. Its dividend currently yields 3.7%.
The only fly in the ointment for AbbVie is that its top-selling drug Humira loses U.S. exclusivity next year. Although this will make a dent in the company's revenue and earnings temporarily, AbbVie should rebound quickly thanks to its strong product lineup and pipeline programs.
2. Brookfield Renewable
Brookfield Renewable (BEP) (BEPC) operates hydroelectric, solar, wind, and storage facilities that have a combined capacity of 21 gigawatts. Its renewable energy facilities are spread across North America, South America, Europe, and Asia.
The company views “inflation as a tailwind.” Around 70% of Brookfield Renewable's contracts have automatic inflation escalators. The renewable energy provider's exposure to rising labor costs is relatively limited. And the company's energy sources — sun, wind, and water — are free.
Many countries and large corporations have established ambitious goals to reduce carbon emissions over the next few decades. These efforts will almost certainly drive increased demand for renewable energy. Brookfield Renewable is poised to meet these needs with a development pipeline capacity of 69 gigawatts — more than triple its current capacity.
This clear path to sustained growth isn't the only major plus for Brookfield Renewable. The company also offers an attractive distribution that yields close to 3.6%. Brookfield Renewable expects to increase its distribution between 5% and 9% per year.
3. Markel
Markel‘s (MKL) core business is providing specialty insurance for customers who typically can't obtain coverage through traditional insurance policies. This business generates significant cash flow, some of which Markel uses to invest in other companies.
Warren Buffett once wrote that the businesses that are most adaptable to high inflation do two things. First, they can easily increase prices without losing significant market share or volume. Second, they can increase business volume significantly without investing a lot of capital. Markel checks off both boxes.
Unsurprisingly, Buffett's Berkshire Hathaway initiated a position in Markel earlier this year. But it's probably not just Markel's inflation resistance that was so appealing to Buffett and his team. The company's long-term growth prospects are strong.
Markel's specialty insurance business should continue to flourish thanks to its solid underwriting process. Its Markel Ventures companies, which include a variety of businesses, are well-positioned for growth. Markel's investment portfolio should also perform well over the long run.
Originally published on Fool.com
*Stock Advisor returns as of June 2, 2022
Keith Speights has positions in AbbVie, Berkshire Hathaway (B shares), Brookfield Renewable Corporation Inc., and Brookfield Renewable Partners L.P. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), Brookfield Renewable Corporation Inc., and Markel. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
