TThe Federal Reserve doesn’t believe that current high inflation levels are “transitory,” however, it seems to think that bringing inflation under control will not be difficult with a series of interest rate increases and the gradual tightening its loose fiscal policy. This Fool Live clip, Recorded Jan. 27Fool.com contributors Travis Hoium and Rick Munarriz discuss some stocks they think are especially well-positioned to continue performing well, even if inflation persists longer than expected.
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Travis Hoium If we have high inflation, you can choose one stock. I’ll be the first. This is an inflation hedge that I have mentioned before. MGM Resorts (NYSE: MGM). This is where most of the company’s expenses are incurred when you build the resort. This is when you make your multibillion-dollar outlay. A large portion of the money you spend on room rates will go to your pocket if they go up from an average $100 per night to $120 per evening. If we can get inflation for a sustained time — provided it doesn’t kill the economy which is a whole different kettle of fish — then that’s a company I believe can do well. Jose, what are your thoughts?
Jose Najarro: This one is tricky. If it doesn’t kill the economy I think I would opt for something in the advertisement market. I believe this market is a continuation one, since one business can fall and another one can rise. It would be either Google (NASDAQ: GOOGL)(NASDAQ: GOOG)Facebook. Let me just see… Rick was the one who mentioned strong balance sheets. Both those companies are especially important to me. Meta (NASDAQ: FB)Strong balance sheet. I believe we’ll see great acquisitions of them in the near future. I believe this year, and possibly next year, can be years full of acquisitions where some of these companies will pick up smaller companies to improve the technology. Meta and Google are likely to be on my top five.
Hoium: Rick?
Rick Munarriz: Sure. It’s an advertisement play, just like Jose said. But I’m going with it. Roku (NASDAQ: ROKU). Roku is a stock that has been beaten down but is still the industry leader in operating systems for smart TVs. It is factory-installed in 38% of all TVs. It is the most popular. It holds almost twice the market share as the second most popular platform for streaming through different channels. This is a company that… I mentioned balance sheets earlier. They have $2B in cash and $500M in long-term debt. It’s a good balance but not necessarily the argument that I’m trying to make here.
Jose’s point is just right. If inflation is increasing and people are like it, it’s hurting their ability spend. [on]Roku is a completely free service. Roku is free to use. You can even get a free channel. You don’t need to pay for it Netflix (NASDAQ: NFLX)You can stream any content from Quibi or any other services. They also have older content. They also have older content. They make referrals from both services and ad revenue. I believe that with inflation rising and products becoming more expensive, marketers will have to justify why their products are more expensive. I believe this is a good time to be in the advertising industry.
Matt Frankel: I’m going along with one my boring real estate stocks. AvalonBay Communities (NYSE: AVB). They are a large apartment real estate investment trust. We have a housing shortage. They should also generate great returns, regardless of how inflation affects them. Multifamily lease terms are relatively short, so apartment rents tend to keep pace with inflation year after year. This is unlike many commercial real estate types. If inflation is 10% in the next year, multifamily owners will be able to adjust their rents upwards within a year for each unit in their portfolio. This is a great way to play on inflation and the housing shortage that will take years to fix.
Suzanne Frey is an executive at Alphabet and a member of The Motley Fool’s boards of directors. Randi Zuckerberg, a former Director of Market Development and spokeswoman for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg is a member The Motley Fool’s Board of Directors. Jose NajarroAlphabet (C-shares), Meta Platforms, Inc., Roku Matthew Frankel CFPDoes not hold any position in any of these stocks. Rick MunarrizAlphabet (A shares), Alphabet, (C shares), AvalonBay Communities and Netflix. Travis HoiumMGM Resorts International owns. The Motley Fool recommends Alphabet (A stocks), Meta Platforms, Inc., Netflix, Roku, and Alphabet (A shares). The Motley fool recommends Alphabet, C shares, and AvalonBay Communities. The Motley Fool has an Disclosure policy.
These opinions and views are the author’s. They do not necessarily reflect those expressed by Nasdaq, Inc.