As crypto, oil, gold and real estate have their moment, the best refuge from concerns about inflation may be something a lot less flashy: traditional value stocks, posits an article in The Wall Street Journal.
Value investing had a bright shiny moment earlier this year, then sank back into the shadows as stocks like Tesla soared to triple-digit earnings multiples. But contrary to the belief that any type of stock is a bad investment when the cost of living rises, companies with real assets, the ability to raise prices, and debts that get eroded by inflation have often done well at times when inflation was elevated.
And even when they didn’t, value stocks could still be counted on to be relatively good performers, the article contends. Growth may still continue to beat value if inflation is truly transitory, but those inflation concerns can sometimes become enmeshed and turn into a persistent trend. Companies that can raise prices—such as those that make electric cars or software—may see their shares become less attractive if inflation does pick up because when interest rates go up, a future payoff is worth less than a reliable influx of cash in the short term.
With all that uncertainty, value stocks can provide an inflation hedge, better than bitcoin which has no intrinsic value and may or may not protect you. Betting on a store of value in the shape of inexpensive stocks, according to some analysts, just might be the best strategy, even if it’s not the most exciting.