If inflation slams the economy, these are the stocks you want to own, says Bernstein

Published Thu, Nov 4 20217:30 PM EDT

Analysts at Bernstein have named a raft of global stocks they say consistently outperform during periods of higher inflation. Across the world, prices have been on the rise this year. The U.S. consumer price index rose 0.3% in September , or an increase of 4.4% on a year-on-year basis — the fastest pace in more than 30 years. Federal Reserve officials have called the current inflation run "transitory," largely attributing the spike to supply chain and demand issues that they expect to subside in the months ahead. However, Fed Chairman Jerome Powell noted in September that he sees current pressures running into 2022. Meanwhile, inflation hit a new 13-year high in October in the euro zone . European Central Bank President Christine Lagarde expects inflation to ease in 2022, although she acknowledged that it "will take longer to decline than previously expected." Against this backdrop, investors can position themselves for inflation by owning stocks with the highest pricing power, Bernstein analysts led by Ann Larson said on Oct. 26. C ompanies with high pricing power are thought to be able to increase prices without having a significant effect on demand. To screen for these stocks, the investment bank ranked companies on their ability to maintain or improve gross margins — total sales minus the cost of goods sold. "We use gross margin to define pricing power because a company's ability to enhance revenues in the face of rising costs helps us determine which firms will be able to effectively pass increasing expenses on to consumers," the analysts wrote. They said that during past inflationary periods in the U.S., stocks at the top of their pricing power list "consistently outperformed" those at the bottom. Stock picks Bernstein's list of U.S. stocks with high pricing power include healthcare, energy and consumer names. Healthcare stocks on the list include insurer UnitedHealth as well as pharmaceutical giants Abbott and Merck . Energy names include Chevron , Halliburton and Cheniere Energy , while PepsiCo , Costco and Booking Holdings are among the investment bank's consumer stock picks. In Europe, Bernstein found that stocks with the highest pricing power are primarily found in the consumer goods and healthcare sectors, as well in Germany and the U.K. Luxury groups LVMH and Hermes , Swiss drugmaker Roche , beauty giant L'Oréa l and British consumer goods firm Reckitt Benckiser are among Bernstein's stock picks in Europe. The analysts also like German medical technology company Siemens Healthineers and laboratory equipment supplier Sartorius Stedim In Asia, Bernstein advocates exposure to Chinese, Australian, Taiwanese and Indian companies with higher pricing power during inflationary time periods. Nasdaq-listed online travel booking platform Trip.com , Chinese alcoholic beverage firms Wuliangye Yibin and Kweichow Moutai , and State bank of India all made the list. As did ICICI Bank , Chinese pharmaceutical firm Sino Biopharmaceutical , multi-port operator Adani Ports and Sez and wind farm operator China Longyuan Power .

A customer selects goods at a supermarket in New York, the United States, Aug. 11, 2021.

Wang Ying | Xinhua News Agency | Getty Images

Analysts at Bernstein have named a raft of global stocks they say consistently outperform during periods of higher inflation.