While inflation is nowhere near its highs from the past few years, it’s still stuck at a higher level. That could weigh on company profitability, particularly for companies that can’t pass off higher prices to customers.
However, companies with strong brands and low-priced items can typically raise their prices above and beyond inflation. That means that even as prices rise, they can continue to earn a solid return. These companies may be worth a closer look as inflation stays high.
One such company with leading brands is
Colgate-Palmolive (CL). The manufacturer of household brands such as toothpaste and soaps just reported a beat on earnings and increased guidance.
Consumers continue to buy the company’s products, and they can continue to raise prices higher than any increase in manufacturing those products.
Meanwhile, shares are up 11% over the past year, underperforming the overall market. There may be further upsides for shares as a hedge against inflation.
Action to take: Long-term investors and traders alike may like shares here, given their trend higher. Colgate is also a dividend growth stock with a current yield of 2.2%.
For traders, the uptrend hasn’t fully played out yet. The August $95 calls, last trading for about $1.60, could see mid-to-high double-digit returns on the uptrend playing out in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.