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Think differently if you really want to beat inflation

Feb 10, 2022

Good morning!

Yields up, stocks down after a blistering inflation report.

Here’s my playbook.

1 – Beating inflation isn’t that difficult

The Fed’s transitory narrative may go down in history as one of the worst market calls ever. Inflation jumped 7.5% YoY and is now at the highest level since 1982, 40 years ago. (Read)

Many investors are understandably flummoxed, especially when their portfolios get pounded every time rates jump. Others find it exceptionally frustrating that their wallets are getting crushed every time they go to the store, including yours truly.

Investing right now is like playing chicken on a country road, I noted to the fabulous Scott “the Cow Guy” Shellady recently (Watch).

Beating inflation isn’t that difficult but it won’t be a smooth ride and it does require thinking differently.

Big tech stocks are growing at 20-40% year over year. They create products and services we cannot live without. They can influence consumer purchasing behaviour and have plenty of pricing power which means they can protect margins – inflation or no inflation.

Dips are a gift if you’ve got the right perspective.

Don’t believe me?

I get that a lot but think logically.

If I’ve said it once, I’ve said it a thousand times … people are changing what they buy because inflation is so nasty. However, I have not heard of one person yet who’s giving up their iPhone or their Droid because of it.

Gasoline, same thing.

Defense, ditto.

Food, yep.

You know what to do and what to buy!

If you’d like some help, I’m here. If you’ve got that covered, excellent!!

2 – “Parks will come roaring back”

That’s what I told Maria Bartiromo yesterday morning when we chatted about Disney. (Watch)

And as I expected would be the case, the company knocked the leather of the ball with park revenues playing a central role. Subscribers and content were also something I pointed out and both of those things were monsters!

I’ve already heard from several folks who bought Disney yesterday after watching my take ahead of earnings. Well played – and thrilled to hear of your success!

Now, to Jim’s point, we’ve got to see the numbers stick!

I think they will. CEO Bob Chapek knows how to play the game and is already tracking into the back half of this year and into 2023.

Disney is a Netflix killer.

3 – Forget Coke v Pepsi

At the risk of dating myself, I grew up with the Coke/Pepsi challenge. Both companies reported solid numbers yesterday with the former turning in 9% growth while the latter hit 12%.

I think Pepsi is the better play based on a 7% dividend increase and a new $10 billion buyback plan. (Read)

Cost pressure will be a problem because of inflation which is why I don’t own shares in either, preferring to concentrate on specific retailers who make a lot more money selling sugar water than the companies producing it.

One of my favorites is up 47.8% over the past 12 months even after a monster pullback. This versus 23.17% from PEP over the same time frame to give you an idea. (Get the stock)

People hunt for the needle but sometimes owning the haystack is better.

4 – A $4 trillion market by 2040

SpaceX reports that a solar storm just vaporized 40 satellites. (Read)

Two thoughts come to mind, assuming the Borg haven’t arrived.

First, solar storms are super-serious. Our planet could be taken back to feudal times in an instant if there’s a bad one. Read up on the Carrington Event of 1859 but grab a stiff drink first. (Read)

Second, we cannot live without satellites which means the need for inexpensive rockets and replacement satellites will grow materially over the next few years.

The “smallsat” market may reach $4 trillion by 2040.

I know that sounds like a long way away, but the groundwork is being put in place right now and it’s important you begin putting money in place now before everybody else understands the game at hand.

Oh, and not to put on my tin-foil hat, but China recently complained that SpaceX satellites nearly took out its space station. Hmmmm…..

5 – There’s only one stock on this list I’d buy

It’s a common tale … pandemic winners that rose more than 100% have now cratered as investors realize that nothing lasts forever. Well, that and the fact that people actually want to get out and live their lives.

But I digress.

There’s only one stock on this list I’d buy. (Read)

I made an aborted run at Cloudflare (NET) in Trade with Keith recently but am keen try again when the numbers line up.