An Inflation-Fighting Stock Strategy
Amanda Heckman|October 22, 2022
The not-so-secret news is out…
More than 90% of U.S. voters are worried about the devastating effects of inflation, according to one recent survey. It’s the No. 1 concern among Americans, according to another survey.
Raise your hand if you’re surprised.
Every day we see yet another price hike somewhere in the economy.
Here are some of the ugly numbers from September, courtesy of the Bureau of Labor Statistics. Year over year…
- Rent is up 7.2%.
- Electricity is up 15.5%.
- Groceries are up 13%.
- Poultry is up 17.2%.
- Eggs are up 30.5%.
- Butter is up 26.6%
- Men’s suits are up 9.5%.
- Utility gas is up 33.1%.
- Health insurance is up 28.2% (the biggest jump on record).
- Airline fares are up 42.9%.
And even our Thanksgiving dinner won’t be spared. The USDA reports that the average price of frozen turkeys is up by 73% year over year.
But don’t worry… Social Security benefits will increase by 8.7% next year.
That’ll cover it.
No… this is just painful proof that it’s more critical than ever to find strategies that can help you fight off the worst inflation in 40 years.
Down but Not Out
We are far from the end of this inflation fight. And that means the markets will continue to rock and roll as every new piece of data comes out.
The bottom is not in yet, but that doesn’t mean we can’t look for stocks that have been beaten down with the markets. I’m talking about stocks that are undervalued based on their expectations. Those stocks have the potential to generate the kinds of gains that can help you fight inflation.
Manward contributor and hedge fund manager Alpesh Patel told you about one such stock in his latest Stock of the Week video.
It’s a company that’s off to a good start to its fiscal year. Sales are growing… and earnings and pretax profits are both expected to grow by 10%.
But its forecast P/E ratio is 18.8. Its three-year average is 19.8, so right now, the stock is undervalued.
And last week, Alpesh showed you another stock that is hugely undervalued according to its forecast P/E. It’s a steal right now at 16.8, considering its three-year average is a blistering 36.4.
Forecast P/E isn’t the only metric to check to find undervalued stocks.
You can also look at discounted cash flow. This measures the value of a company today based on how much cash it’s projected to make in the future. In Alpesh’s example from last week, the stock was 50% undervalued based on discounted cash flow.
These are just two of the metrics Alpesh uses to target the strongest stocks in the market.
When we add his No. 1 indicator to the equation, we get a strategy that could be the single best way to not just survive market downturns… but come out the other side wealthier than ever.
Alpesh will have more details on this little-known indicator on Monday. Stay tuned.
Amanda Heckman is the editorial director of Manward Press. With unrivaled meticulousness, she has spent the past dozen or so years – give or take a few sabbaticals – sharpening Andy’s already razorlike wit. A classically trained musician and a skilled writer in her own right, Amanda takes an artistic approach to the complex world of investing. Her skill has led her to work with numerous bestselling authors, award-winning financial gurus and – lucky for us – the fine folks at Manward Press.