One Inflation-Resistant Stock to Buy, One to Avoid – and a Strategy That Hasn’t Been This Cheap in Decades
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Inflation hasn’t been this bad since 1981 — and could easily spool up this winter. There’s a steady drumbeat of recession predictions. The war in Ukraine, ongoing issues with China, and political schisms here in America are fueling a backdrop of uncertainty that we haven’t seen in years.
And that’s before any financial, economic, or geopolitical “wild cards” that can come out of nowhere to destabilize stock prices or the U.S. marketplace virtually overnight.
Yes, it’s a tough time to be an investor — especially an investor who’s nearing retirement, already retired, or working toward near-term goals like a house for the family or college for your son, daughter, or grandkids. And if you’re one of those folks “living close to the edge” with tight finances or a personal money crisis, there’s that fear of something dark and threatening, just beyond your peripheral view.
At times it’s downright terrifying.
And that’s where a strategy focused on high-quality, dividend-paying defensive stocks comes in.
With the S&P 500 Index down 20% from its peak — and all these worries on the rise — creating a pool of these strong dividend stocks seems to be the play to make.
With stocks now technically in a bear market and many down much more than the 20% of the aforementioned bellwether, there are plenty of bargains to choose from.
But you’ve got to be certain you are choosing the right ones: shares of companies that at least can survive accelerating inflation and an uncertain economy.
I’ll give you an example — but I’m going to show you something else, too.
Because buying “survival stocks” may not be enough.
You may need outperformers — including something I call “alt shares.” If you take a small slice of the underperforming part of your portfolio and put it to work with my alt-shares strategy, you won’t just keep pace with inflation — you’ll downright leapfrog it with 4x, 5x, or even 6x gains.
And with only modest levels of risk.
In today’s broadcast, I’ll give you a side-by-side comparison — a “Buy This/Not That” rundown — on two dividend-paying stocks, and tell you how alt shares can help you pull even greater gains out of high-performing stocks.
One Stock to Avoid – And One to BuyThe first is supermarket chain The Kroger Co. (KR).
Kroger is America’s largest grocery store chain, with more than 2,700 stores nationwide and yearly revenue of more than $137 billion.
There is no doubt that KR is a quality company. It’s also a recession-resistant company, which is a great attribute with so many market commentators using the word “recession” these days.
After all, even if the economy does head south, we still have to eat.
And with recent prices around $47.50, Kroger is up about 5% year-to-date with a forward dividend of 1.77%.
This is all true, but KR would still not be a top pick for me right now.
So, what’s not to like?
The stock may carry a “Bullish” rating in our system, and also be bullish from a trend vantage point, but it’s in the Red Zone, according to our Health Indicator.
While KR is certainly a recession-resistant blue chip capable of surviving an economic downturn, it is not very well positioned to survive the highest inflation we’ve experienced in more than 40 years, let alone thrive in such a rising-cost environment. And it could be hurt by higher interest rates, too.
Kroger doesn’t raise its own chickens, and last time I checked, it doesn’t brew its own beer. That means it has to pay suppliers for all the groceries it sells. And those prices are going up, squeezing KR’s profit margins in the process.
Sure, KR can pass along some of those price increases, but not as much as you think… because it’s in a brutally competitive business.
Rivals like Walmart Inc. (WMT), the Whole Foods unit of Amazon.com Inc. (AMZN), and plenty of smaller grocery store chains and upstart fresh markets are fiercely competing for every shopper. On top of that, folks are a lot more price-conscious these days due to higher inflation, and they will go where they find the best deals.
The bottom line: Kroger doesn’t make my “Buy” list right now.
Now, let’s look at PepsiCo Inc. (PEP) by comparison.
The soda-and-snacks giant is tackling inflation head-on, reporting second-quarter results just last week that trounced analyst expectations. Net sales came in at $20.2 billion (versus forecasts of $19.55 billion), per-share earnings were $1.86 (versus predictions of $1.74), and organic sales growth was 13% (nearly double expectations of 7.48%).
Even better: The company boosted its already-bullish full-year outlook.
In the post-earnings-report conference call with investors Tuesday, the company said inflation would be up by a “mid-teens” percentage this year, meaning pricing pressures will continue to hit the company in both its production processes and the raw materials it needs to make salty snacks and sweet sodas.
Indeed, Hugh Johnston, PepsiCo’s longtime CFO, told a Yahoo Finance interviewer last week that inflation will be sticking around for a long time.
“We’ll see how next year evolves,” Johnston told the journalist. “Certainly in the early portion of the year given that we forward buy our commodities by about nine months we know we are going to face inflation in the first half of the year.”
Analysts say Pepsi has navigated this inflationary conflagration well so far, having boosted sales and profits in the first half of this year. The fact that it boosted its outlook — especially considering public companies don’t do this if they believe there’s any chance of having to pull back later — tells us company execs are confident that Pepsi can muscle its way through the rest of the year.
At a recent price of $171.12, Pepsi’s shares have been treading water so far this year. But it has a forward dividend yield of 2.7% — about 50% more than Kroger.
Our system shows that Pepsi’s shares have a “Strong Bullish” rating and are trading in the healthy Green Zone.
The bottom line: Pepsi does make my “Buy” list right now.
Put a Tiny Bit of Cash to Work Here – And Wait for the Huge PayoffOur “Buy This/Not That” analysis has given you a nice, defensive dividend stock with solid finances and bullish prospects.
But instead of simply buying shares outright, there’s a better way to capitalize on this opportunity — the “alt shares” I referred to at the start of this email.
Now, more than ever, you need a strategy that gives you the potential for low-cost, lower-risk, and high-return investment alternatives to plain old stocks and bonds.
Just to be clear, I’m not talking about taking a speculative flier using stock options… or penny stocks… or crypto.
I’m not dismissing any of those, either — not at all, for each of those investment vehicles has its place. But they’re not part of my strategy here.
What I am talking about is a strategy that involves using small amounts of cash to generate extra-high returns — the 4x, 5x, and 6x gains I mentioned at the beginning of this broadcast.
Alt shares are a favorite of mine right now. My own investment portfolio includes dozens of alt-share positions.
With this strategy, I skip over the conservative dividend payers and look at growth stocks that have “double-your-money” potential. Then I look for “alt-share” ways to play those stocks.
Here’s what most investors don’t realize: With the major indexes down 20% to 25% — and many individual stocks down much, much more — these alt shares are dirt-cheap right now.
Look, I even had to scratch my head and take some time to think about the last time I’ve seen alt shares trading at levels this low — it’s been at least a decade.
This is my single-favorite bear-market strategy, as you can set yourself up for 400%, 500%, and 600% gains and still have much lower levels of risk.
In your portfolio right now, just take a look at the companies that haven’t done much for you over a long stretch. Put a tiny bit of your money to work here instead and reap the windfalls that alt shares deliver.
I’m pounding the table on this because I can’t say when we’ll see this kind of a major wealth window again.
That’s why I want to tell you all about it right now.
Because on Tuesday, July 26, at 8 p.m. Eastern, I will demonstrate an investing strategy that generates 5x more revenue than the real estate sector — and as much as 17x more than blue-chip stock payouts — without buying or shorting stocks.
Click here to secure your spot. It’s completely free, and it may just be the “Holy Grail” moneymaking technique you’ve been looking for.