3 inflation-defeating stocks for your portfolio

Inflation gradually erodes the purchasing power of your dollar. The best way to combat creeping inflation is to invest in companies that are immune to rising prices. Therefore, investors might consider buying fundamentally solid, inflation-beating stocks: Walmart Inc. (WMT), Costco Wholesale Corporation (COST), And Johnson & Johnson (JNJ).

The The consumer price index, an important inflation indicator, was 2.9% in July 2024still above the Fed's target of 2%, according to the US Bureau of Labor Statistics. Given this high inflation, inflation hedging strategies seek to counteract the wealth-destroying effects of inflation by selecting investments that can potentially mitigate the effects of inflation.

Companies from defensive sectors such as consumer goods and healthcare tend to do well in inflationary or recessionary times. This is because there is a steady demand for their products regardless of the economic situation.

Taking these factors into account, let us now take a look at the basics of the three preferably Combating inflation Shares.

Walmart Inc. (WMT)

WMT is engaged in retail, wholesale, other business operations and e-commerce worldwide. The company operates in three segments: Walmart US, Walmart International and Sam's Club. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash-and-carry stores and discount stores under the Walmart and Walmart Neighborhood Market brands.

On August 22, 2024, WMT and Burger King joined forces to introduce an exclusive dining benefit for WMT members, increasing the value and convenience of the membership program.

WMT members receive 25% off every digital order at Burger King every day. Starting in September, members can receive a free flame-grilled Whopper with every purchase every three months.

On June 13, WMT announced the transformation of one of its largest and most recognized fashion brands, No Boundaries, into a private label. The $2 billion+ young adult brand will offer customers a modern, relevant and youthful assortment with new finishes, shapes and styles – all at the same great prices.

WMT's annual dividend rate of $0.83 equates to 1.09% at current share prices. The company's dividend payouts have grown at average annual growth rates of 3.6% and 2.9% over the past three and five years, respectively. WMT has a 50-year history of continuous dividend growth.

WMT's ROCE for the last 12 months of 18.97% is 74.9% higher than the industry average of 10.85%. Also, its ROTC and ROTA for the last 12 months of 11.70% and 6.11% are 69.1% and 34% higher than the industry averages of 6.92% and 4.56%, respectively.

For the second fiscal quarter ended July 31, 2024, WMT’s total revenue increased 4.8% year-over-year to $169.34 billion. Adjusted Operating result increased 7.2% year-over-year to $7.94 billion. The company's consolidated net income attributable to WMT was $4.50 billion, or $0.56 per common share.

Analysts expect WMT's revenue to increase 4.1% year-over-year to $166.01 billion for the fiscal quarter (ending October 2024). Earnings per share for the same quarter are expected to increase 3.7% year-over-year to $0.53. In addition, WMT beat consensus on revenue and earnings per share in each of the last four quarters.

Over the past six months, the stock has gained 27.7% and closed the last trading session at $76.13.

WMTs POWR Reviews reflect its outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, with each factor being given optimal weighting.

The stock has an A rating for stability and a B rating for dynamism, sentiment, growth and quality. It ranks 6th among the 37 stocks rated A Food/Wholesale Retailers Industry.

In addition, we also rated WMT on its value. View all WMT ratings Here.

Costco Wholesale Corporation (COST)

COST, together with its subsidiaries, operates member warehouses worldwide. The company offers branded and private label products in a range of merchandise categories, warehouse support services and other business activities. It operates in three segments: U.S. Stores, Canadian Stores and Other International Stores.

On August 9, the company paid its shareholders a quarterly dividend of $1.16 per share. After 19 years of continuous dividend growth, COST pays an annual dividend of $4.64, which equates to a yield of 0.52% at current prices. The average dividend yield over the last four years is 1.66%. The company's dividend payments have grown at an average annual growth rate of 23% over the last three years and at an average annual growth rate of 17.9% over the last five years.

Looking at the trailing 12 months, COST's ROCE and ROTC figures of 31.64% and 17.72% are 191.7% and 156.2% higher than the respective industry averages of 10.58% and 6.92%. In addition, its trailing 12-month asset turnover ratio of 3.77x is compared to the industry average of 0.85x.

For the third quarter of 2024, ended May 12, COST's total revenue increased 9.1% year-over-year to $58.52 billion, while operating income was $2.20 billion, an increase of 30.9% year-over-year.

Net income for the quarter was $1.68 billion, or $3.78 per share, up 29% from the same period last year. The company's net cash flow from operations also rose 14.1% year over year to $8.38 billion.

The consensus revenue estimate of $80.20 billion for the fourth fiscal quarter (ending August 2024) represents a year-over-year increase of 1.6%. The consensus earnings per share estimate of $5.07 for the same quarter indicates a year-over-year improvement of 4.4%. The company has an impressive earnings surprise history; it has beaten consensus earnings per share estimates in each of the last four quarters.

COST shares have gained 21.9% over the past six months and closed the last trading session at $908.90.

COST's POWR Ratings reflect a bright outlook. The stock has an overall rating of B, which equates to Buy in our proprietary scoring system.

COST has a B rating for momentum and sentiment. The company ranks 26th in the food retail/wholesale sector.

In addition to the POWR ratings highlighted above, one can access COST's ratings for growth, value, sentiment, and quality. Here.

Johnson & Johnson (JNJ)

JNJ researches, develops, manufactures and markets various healthcare products worldwide. The company operates in two segments: Innovative Medicine and MedTech.

On July 30, 2024, JNJ announced that the FDA approved DARZALEX FASPRO in a quadruple regimen for newly diagnosed, transplant-eligible patients with multiple myeloma. The regimen, which combines DARZALEX FASPRO with bortezomib, lenalidomide, and dexamethasone, demonstrated a 60 percent reduction in disease progression or death. The approval is expected to be accretive for the company.

On July 11, 2024, JNJ announced the acquisition of Yellow Jersey Therapeutics for $1.25 billion, acquiring the rights to NM26, a Phase 2-ready bispecific antibody against atopic dermatitis. NM26 targets two key pathways in the disease and is expected to improve treatment options.

JNJ's dividend yield of $4.96 equates to 3.04% based on current prices. Dividend payouts have increased by an average of 5.5% over the past three years and 5.6% over the past five years. The company has a history of 61 consecutive dividend increases.

In terms of trailing 12-month EBITDA margin, JNJ is 35.85%, 509.2% higher than the industry average of 5.88%. Similarly, trailing 12-month gross profit margin is 69.43%, 20.9% higher than the industry average of 57.41%. In addition, trailing 12-month EBIT margin is 27.90%, significantly higher than the industry average of 2.23%.

For the second quarter ended June 30, 2024, JNJ's revenue increased 4.3% year-over-year to $22.45 billion. Similarly, gross profit increased 3.5% year-over-year to $15.58 billion. In addition, the company's adjusted net income increased 1.6%, or 10.2%, year-over-year to $6.84 billion, or $2.82 per share.

For the quarter ending September 30, 2024, JNJ's revenue is expected to increase 3.7% year-over-year to $22.14 billion. Earnings per share for the quarter ending December 31, 2024, are expected to increase slightly year-over-year to $2.30. It has beaten consensus earnings per share estimates in each of the last four quarters.

JNJ shares have gained 1.4% over the past month, closing the last trading session at $162.95.

JNJ's strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary scoring system.

JNJ has a B rating for value, stability and quality. It ranks 18th out of 158 stocks in the Medicine – Pharmaceuticals Industry.

Click here to access additional JNJ ratings (Growth, Momentum and Sentiment).

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WMT shares were trading at $76.16 per share on Wednesday afternoon, up $0.03 (+0.04%). Year-to-date, WMT has gained 46.33%, while the benchmark S&P 500 index has risen 18.10% over the same period.

About the author: Nidhi Agarwal

Nidhi has a passion for capital market and asset management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is currently pursuing the CFA program. Her fundamental approach to equity analysis helps investors identify the best investment opportunities. More…

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