How to invest if we really have big Inflation? Let’s talk worst case scenario, everything going up 5-10%. These are three rules on stocks which may benefit in a period of high inflation with some inputs from what Warren Buffett has recommended.
Rule #1 Businesses that don’t need capital investments
Most classic is SIA second is SEMB MAR who ironically is showing some life now.
Big picture, in short term stock price is unpredictable and a voting machine.
These are companies that need to make capital investments all the time. SIA buy planes, SembMar needs materials to produce ship or rigs.
Other examples will include KEPPEL CORP, SEMB CORP heavy industrials or F&N which produces our favourite milk and soft drinks.
What abt Starhub, singtel, Netlink and Keppel Infrastructure Trust?
If you believe this is the case, I can suggest something for you to consider
Look for the ROA return on asset of the company.
Filter for it in your shortlist because ROA is return over asset.
If the company is a heavy capital investment business, the ROA is typically LOW.
Rule #2 Businesses that are Brands
Sees candy is his favourite example. PRODUCT STILL IN DEMAND regardless of price.
What can we find LVHM, which I covered before on a previous video.
Listed in France more easy to access via funds.
APPLE? Definitely makes sense
What can we see here in Singapore like F&N or The Hour Glass?
Rule #3 Businesses that are able to control cost well.
In an inflation world, revenues increase but cost also inflates. The ones that will thrive are those that can cost manage better.
#inflation #inflationstocks
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LEARN ABOUT: Investing During Inflation
REVEALED: Best Investment During Inflation
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HOW TO INVEST IN SILVER: Silver IRA Investing
Investing during inflation can be a challenging task as it can have severe impacts on the economy, businesses, and individuals’ financial stability. However, if you make wise decisions, inflation can also offer lucrative investment opportunities. So, what are the best stocks to invest during inflation? Here are three rules to determine the best investment during inflation.
1. Invest in companies that can raise prices.
When inflation occurs, prices of goods and services rise, creating a demand for products that can adjust their prices accordingly. Companies that have the ability to increase prices to maintain their revenue streams are excellent investments during inflation.
Industries such as consumer staples, healthcare, and utilities are typically less affected by inflation, as these goods and services are considered essential. Investing in such companies during inflation makes it more probable to withstand the financial turmoil.
2. Invest in commodities or natural resources.
Commodities or natural resources such as gold, oil, and agricultural products tend to appreciate during inflation as investors move money out of traditional stocks and bonds. These assets have a finite supply, which makes them valuable. When inflation occurs, the demand for commodities and natural resources rises, pushing up their prices.
Investing in commodities can provide a hedge against inflation and protect your portfolio from volatility. Commodities’ value does not directly correlate with the value of currency, and they tend to retain their worth even during economic downturns.
3. Invest in companies with low debt.
As inflation increases, so do interest rates, making indebted companies vulnerable to the market. Companies with excessive debt may struggle to repay their loans, thus increasing the risk of bankruptcy.
Investing in companies with low debt ratios ensures that they can withstand inflation without struggling to pay off their obligations. These companies have financial stability and are better equipped to navigate financial crises.
In conclusion, investing during inflation can offer promising opportunities with the potential for significant returns. The key to successful investment during inflation is to choose stocks based on the three rules mentioned above. Investing in companies that can raise prices, commodities, and natural resources or companies with low debt can provide a defense against inflation and safeguard your investment portfolio.
Thank you. Good content. I fully agree on Reits and Banks. I have been doubling down on them. I think DBS is a better bet because it is a better run bank. IMHO.
I see it’s as a stagflation more than an inflation come next year, If covid persist.
Good explanation and sharing! Businesses with strong pricing power and don't require continuous reinvestment will be the beneficiaries during inflationary periods.
Add a public comment…
Chen Liu
0 seconds ago
Hi Josh,
Do you mind making a video to teach us the recent m44u fund raise. I went all in for mapletree logistics trust the day before their suspension and the price dropped today.
I wish to know that as a shareholder, how can I subscribed for po to buy the preferential share?
Very much hoping your help
Well explained, I personally preferred to invest in capital light and Low operating costs companies.
Thanks you Josh!
Love the intro video
LVMH .. not HM 😉
what software are you using to derive the ROA in your video?
Can Josh do a video on properties inflation vs median earnings of Singaporeans and how much should a person earn to afford a $1m private condo based on 50 yrs age group? Remember you did a video on 2 Malays HDB upgrades to private condos as appeared in the news recently.
Price of food will inch up due to global warming resulted lower yield n human population increasing. Oil demand will be damper by renewal energy ( solar, wind, ) in the near future. So need to let your $ work harder 4 u ( equities, real estate,etc).
Thank you
I don't feel any benefits from reits. Keep dropping n dropping
I think SBS is one of those company that people should be looking into right now. With downtine line transiting to the new rail financing framework, SBS will be more of an asset-light company and thus higher ROA and lower depreciation cost which will benefit the shareholders even better.
And also the almost yearly incremental of bus fare, SBS is a great company to own right now.
gd or bad economy or high or low inflation pple still go kopitiam. that why I own kimly. I go kopitiam almost everyday for food:)