10 Stocks That Can Beat Inflation

2022's been a rough year for investors. Though stocks have shown signs of life lately, the S&P 500 is still down 10% year to date, and inflation is the major reason why.

With consumer prices rising faster than they have in 40 years, the Federal Reserve has begun hiking interest rates as fast as it has in a generation. Stocks generally fall when interest rates rise since higher rates make bonds more appealing and make future earnings worth less as money loses its value faster.

More directly, inflation also impacts certain companies, especially those in industrials and consumer goods. Not every stock is vulnerable to inflation, however. Keep reading to see 10 stocks that can beat inflation.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Inflation generally means higher oil prices, and that's exactly what's happened this time around. Oil prices spiked to as high as $130 a barrel in March as Russia invaded the Ukraine. Oil was its highest level since 2008, and it has remained elevated since then as producers are reluctant to ramp up production and labor shortages and supply chain issues continue to weigh on the global economy.

The rise in oil prices has been great news for ExxonMobil (NYSE: XOM). The oil major made $17.9 billion in the second quarter, and though prices have moderated since then, Exxon looks set for a bumper year. The stock is up 51% this year, or nearly 60% when including dividends.

ALSO READ: Investing in Oil Stocks

While many of its retail peers like Walmart and Target have gotten hit hard by inflation and supply chain woes, Costco Wholesale (NASDAQ: COST) continues to deliver impressive growth on both sides of the income statement.

Through the first 48 weeks of its fiscal year, ended July 31, comparable sales excluding fuel and foreign exchange were up 10.8%, and earnings per share increased 19% through the first three quarters of the year.

Compared with peers like Walmart, Costco has an advantage because it carries only about 4,000 stock-keeping units (SKUs), making it much easier for it to manage inventory, and its reputation for low prices helps make it a destination for customers looking to save money. Finally, most of Costco's profit comes from its membership fees, so as long as membership remains strong, profits should be, too.

UnitedHealth Group (NYSE: UNH) is well positioned during inflationary times for two reasons. First, the healthcare sector tends to be recession-proof as people need healthcare regardless of the state of the economy, and buying health insurance isn't related to cyclical economic factors.

Secondly, as an insurance company, UnitedHealth earns money investing its premiums, and higher interest rates help it earn more on fixed income. Though investment income actually fell in the second quarter as the stock market pulled back sharply, over the long run, its investment income should benefit from higher consumer prices.

Utilities are well known as a recession-proof sector because, like healthcare, consumers need electricity and water regardless of the state of the economy. Though utility prices are regulated, they also benefit from inflation because they can pass along higher costs in the form of price increases, making it easy for them to absorb any inflation.

New York-based electric utility Consolidated Edison (NYSE: ED) has posted solid profit gains this year, and the stock was up 18% year to date.

ALSO READ: Here's What Makes This Utility Stock So Safe

Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) has been built to thrive over the long term and outperform in bear markets. Though the company hasn't endured inflation like this in a long time, it's well prepared to since its biggest business is insurance. It owns Geico, among other insurance companies, and Buffett loves the insurance biz because it means he can invest the "float," or the money that comes in from the premiums.

Additionally, the inflationary environment has led to a pullback in stocks, giving Berkshire an opportunity to buy stocks at a discount.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Tech companies have mostly faltered in the face of high inflation as rising interest rates have resulted in valuations falling, but Microsoft (NASDAQ: MSFT) has held its own.

The diversifed tech giant posted 16% constant-currency revenue growth in the second quarter with strong growth in its cloud division, LinkedIn, and its office products.

Adjusted earnings per share also increased 16%, showing the company is delivering strong gains on the bottom line as well.

If you're looking for a reliable healthcare stock, it's hard to do better than Johnson & Johnson (NYSE: JNJ), a Dividend Aristocrat that's been around for more than 100 years and is one of two U.S. companies with a AAA credit rating (Microsoft is the other).

Sales and adjusted earnings per share ticked up in its most recent quarter, and the stock looks well priced at a price-to-earnings ratio of less than 17 based on this year's expected earnings.

The company expects to split into two next year, spinning off the consumer health business, which owns brands like Tylenol, in order to highlight the faster-growing medical devices and pharmaceutical businesses, which will remain as Johnson & Johnson.

ALSO READ: Will Johnson & Johnson Be a Better Buy After Spinning Off Its Consumer Business?

Consumer staples is another sector that tends to be recession-proof, and Coca-Cola (NYSE: KO) is one example of a stock that's managed well through the current inflationary environment.

In its most recent quarter, the company put up 12% revenue growth with 16% organic revenue growth as it benefited from a rebound in in-person dining. That growth was also enough to bump up its adjusted earnings per share by 4%.

With one of the most valuable brands in the world, Coca-Cola was able to pass along price increases to its customers, a reminder that the most powerful brands in the world have pricing power that allows them to absorb inflation.

Industrials like Deere & Co. (NYSE: DE) might not be a typical choice for an inflation-beating stock, but as commodity prices have boomed, especially for crops like wheat, Deere has done well.

The agricultural giant posted 11% revenue growth in its second quarter and 17% earnings-per-share growth, with management saying that market conditions and industry fundamentals remain strong.

Year to date through Aug. 15, the stock is up 7%, beating the S&P 500.

Cal-Maine Foods (NASDAQ: CALM) is the nation's biggest egg producer, and like other commodity stocks, it has the ability to pass along price increases. Food inflation and another outbreak of avian influenza helped drive egg prices up over the past year, leading to strong growth for the company. Prices for conventional eggs nearly doubled in the fourth quarter.

In its fiscal year ended May 28, revenue jumped 32% to $1.78 billion, and earnings per share surged from just $0.04 a year ago to $2.72, showing how sensitive the company is to egg prices.

Cal-Maine's stock has also benefited, climbing 49% year to date.

5 Stocks Under $49
Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

High inflation won't be around forever. The Federal Reserve has said that bringing down inflation is its primary goal, even if that takes several more rate hikes.

The latest consumer price index for July also showed inflation cooling off as year-over-year inflation fell from 9.1% in June to 8.5%, largely due to a fall in oil prices.

Still, the situation remains volatile, especially with the war still going on in Ukraine and consumer confidence down as prices have spiked. While most of the market is still vulnerable to price hikes, the stocks mentioned here can help you ride out the inflationary uncertainty.

Jeremy Bowman has positions in Target. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), Costco Wholesale, Target, and Walmart Inc. The Motley Fool recommends Johnson & Johnson and UnitedHealth Group and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $47.50 calls on Coca-Cola, 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.