The consumer price index, which tracks what consumers typically pay for a range of everyday goods, increased to 3.3% in March, up from 2.4% in February. This uptick is largely attributed to rising gasoline prices, which have a ripple effect across various sectors of the economy. Such inflationary pressures can impact the stock market—a fact that investors are already noticing. It’s crucial for them to focus on stocks that are likely to do well despite this inflation. So, here are three solid options: walmart (NASDAQ:WMT), visa (NYSE:V), and Netflix (NASDAQ:NFLX).
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As prices rise, people often look for deals, and that’s where Walmart shines. It’s one of the largest retailers globally, for good reason: it usually offers lower prices than many competitors. Now, whether Walmart will need to hike prices on certain items due to inflation is uncertain. But, they’re not alone—other large retailers face similar dilemmas. In any case, maintaining their “everyday low prices” strategy relative to competitors will be crucial in keeping customer traffic steady and ensuring decent growth in sales and profits. Walmart has successfully done this for years and should continue seeing solid returns.
One reason Walmart stands out is its push into digital commerce. It ranks among the top e-commerce players in the U.S. With more shopping shifting online, Walmart is likely to experience higher revenue and lower operational costs. Plus, its lucrative advertising sector will likely benefit as well. There’s an interesting side to this business: Walmart is considered a solid dividend stock. It has raised dividends for 53 consecutive years, earning it the “dividend king” title. For cautious investors seeking some stability during these unpredictable times, Walmart is definitely worth a look.
Interestingly, inflation can actually play in Visa’s favor. The company profits by charging a fee based on a percentage of each transaction processed on its network. So, higher prices generally mean increased fees and higher overall revenues. Of course, consumer spending habits will shift, and lower transaction volumes might offset some gains, but Visa has typically navigated inflationary periods quite well.
This makes Visa a stock worth serious consideration, especially since there’s an emphasis on niche markets and those with substantial barriers to entry. Visa believes it still has trillions of dollars in potential transactions to tap into. Moreover, the continued rise of e-commerce, which hinges on digital payment methods, is likely to boost Visa’s prospects. Compounding this is Visa’s unique position; it faces minimal direct competition owing to strong network effects that keep both merchants and consumers within its ecosystem. Furthermore, Visa is an appealing dividend stock, having raised its payouts by 378.6% over the last decade.
On a different note, Netflix has recently unveiled more price increases. Despite the mixed feelings from viewers, its subscriber numbers and revenue have shown positive trends, even with the hikes. Netflix has firmly established itself in the entertainment scene and enjoys significant pricing power. So, inflation probably won’t pose a major threat to the company—lots of subscribers don’t seem to cancel their accounts over price rises. But can the stock still outperform the market in light of stiff competition in streaming? I think it can, and here are a few reasons.
First off, Netflix is still the dominant player in streaming, although the competitive environment has shifted. Its extensive ecosystem gives it a major edge, enabling it to analyze viewer preferences and craft content strategies accordingly. Secondly, there’s plenty of room for growth—the streaming sector still accounts for less than half of TV viewing time in the U.S. as of February.
Lastly, Netflix is pushing hard to expand its offerings, especially in live sports, which could yield future dividends and perhaps lead to high stock returns again.
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We have positions in Visa and Walmart. The Motley Fool has positions in and recommends Netflix, Visa, and Walmart.
