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The global economic recovery has been a boon for companies and stocks. But hidden beneath these gains is a potential spoiler – inflation. The reopening of the economy, combined with labor shortages and pent-up consumer demand driven by government incentives, has created product shortages and barriers in the supply chain. This led to higher product prices and inflation.
The consumer price index (CPI), which measures the rise in the price of goods over a period of time, rose more than 5 percent in the twelve months to September. To make matters worse, Federal Reserve Chairman Jerome Powell said in a recent speech that the global supply chain crisis could last until 2022. Plus, inflation not only hurts corporate margins, it also eats up investor returns.
However, some companies can make higher profits as prices go up. For this reason, investors should consider companies with greater pricing power. This allows them to raise prices faster and pass the costs on to consumers. These stocks can be found in sectors and industries such as energy, chemicals, and consumer staples.
Here are three such stocks that are worth a look:
- EOG Resources, Inc. (NYSE:EOG)
- Olin Corporation (NYSE:OLN)
- Coca-Cola company (NYSE:KO)
Shares to buy: EOG Resources, Inc. (EOG)
EOG is involved in the exploration and production of oil and natural gas. The company’s operations span the United States, China, and Trinidad. To evaluate wells and gas reserves, the company calculates the rate of return based on the profitability of the wells in order to produce optimal quantities of oil and gas while minimizing costs.
In the United States, the company operates with huge oil and natural gas reserves. These reserves are intended to boost the EOG’s oil and natural gas production over several years. The company also has significant oil shale acreage such as Permian, Bakken and Eagle Ford. EOG has approximately 11,500 premium undrilled sites, 6,300 of which are in the Delaware Basin alone.
The company uses technology such as horizontal drilling and advanced completion techniques to maximize production from these wells. EOG is one of the most technically competent operators in the industry. Its initial production rates from its shale wells consistently exceed the industry average. In addition to a strong position in key liquid-rich resources, the Dorado discovery provides additional natural gas revenue.
EOG has an overall rating of B, which results in a purchase rating in our POWR rating system. The company has a growth rate of B because its EBITDA increased by 81.9% in the past year. Analysts expect earnings to rise 452.7% for the year. EOG is also rated B based on solid foundations. Last quarter, the company had $ 3.9 billion in cash, compared to just $ 39 million in short-term debt.
We also offer value, momentum, stability and sentiment grades for EOG, which you can find here. EOG is number 11 in the oil and gas industry. For more top stocks in this industry, click here.
Olin Corporation (OLN)
Source: IgorGolovniov / Shutterstock.com
OLN produces and sells a wide variety of chemicals and chemical-based products. The company sells products in three segments. The segment with the highest sales, chlor-alkali products and vinyls, sells chlorine and caustic soda, which are used in various industries, including cosmetics, textiles, crop protection and fire protection products. Its epoxy segment sells epoxy resins used in paints and coatings.
The Winchester segment sells sports ammunition and ammunition accessories under the Winchester brand. The company benefits from its strategic investment in its IT project. OLN started the project in 2017 to implement a new enterprise resource planning, engineering and manufacturing system. These are used throughout the traditional business and in the Dow business with chlorine products.
The project maximizes profitability and efficiency by standardizing business processes. The project was completed last year and is expected to save approximately $ 50 million annually in costs. OLN also benefits from a multi-year contract to operate the Lake City state ammunition facility. This is a massive growth driver for the company, as annual sales for the Winchester segment are expected to increase by $ 450 million to $ 550 million.
OLN has an overall grade of A and a Strong Buy Rating in our POWR Ratings System. The company has a B growth rate, which is not surprising given that sales and profits are projected to increase 51.9% and 827% for the year, respectively. OLN also has a value of B due to its low valuation metrics. For example, it has a trailing P / E of 9.61 and a forward P / E of 8.
For the remaining OLN grades (Momentum, Stability, Sentiment and Quality) click here. OLN is # 7 in the chemical industry with a B rating. You can find more top stocks in this highly rated industry at this link.
Shares to buy: Coca-Cola Company (KO)
Source: MAHATHIR MOHD YASIN / Shutterstock.com
KO is the world’s largest soft drinks company, owning and marketing some of the leading carbonated beverage brands like Coke, Fanta, Sprite, and non-sparkling brands like Minute Maid, Georgia Coffee, Costa and Glaceau. The company has a market share of more than 40% in the non-alcoholic beverage industry.
KO is developing its business model into a full beverage company due to the industry-wide flattening of lemonade sales. It invests in healthier alternatives like coffee, bottled water, and sports drinks. These include Coca-Cola Energy, Coca-Cola Plus Coffee, Powerade Ultra, and Powerade Power Water.
KO benefits from an improved price mix, an increase in concentrate sales and a higher box volume. This resulted in a solid second quarter and management raised its guidance for the year. As the economy reopened, the company saw increased consumer mobility and an increase in out-of-home channel sales. However, the company should continue to benefit from its investments in expanding its digital presence.
The company has an overall grade of B, which results in a purchase rating in our POWR rating system. KO has a degree of stability of B, since yield and price development were consistent. For example, the stock has a low beta of 0.63. In addition, the company has quality level B, which makes sense with a current key figure of 1.5 and thus has more than enough liquidity to process short-term obligations.
To access all KO classes including Growth, Value, Momentum, and Sentiment, click here. KO is # 9 in the beverage industry with a B rating. For more top stocks in this industry, click here.
At the time of this writing, David Cohne held (neither directly nor indirectly) positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David served as a consultant for 11 years, delivering outsourced investment research and content to financial services companies, hedge funds and online publications. David enjoys researching and writing about stocks and markets. He takes a fundamental, quantitative approach to valuing stocks for readers.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.