Wall Street analysts say these stocks are their favorite 'inflation fighters'

Published Sat, Apr 2 20228:58 AM EDTUpdated Sat, Apr 2 20229:15 AM EDT

Inflation fears are running wild on Wall Street, but analysts this week urged investors to remain calm, naming a group of stocks they believe offer the best protection. These companies are firing on all cylinders, analysts say, and they offer an attractive buying opportunity at a reasonable price. CNBC Pro combed through top Wall Street research reports to find the best stocks to combat inflation worries. They include Charles Schwab , GMS , VICI Properties , Global Payments and Walmart. GMS Earlier this month, Loop Capital began coverage of GMS, a distributor of construction products. The firm gave the company a buy rating. Loop said it sees numerous positive catalysts going forward, including commercial and residential demand strength, margin expansion and conservative sales expectations. Analyst Jeffrey Stevenson also wrote in his note to clients that GMS is well positioned to deal with the threat of inflation. "On a relative basis, distribution is a better place to be right now than manufacturers, given they are not as exposed to inflation pressures of higher energy and transportation costs," he said. Stevenson said residential demand should remain "healthy" despite rising rates for a myriad of reasons and help offset any commercial sluggishness. For starters, a housing backlog remains and inventory is at historically low levels. This should aid the company's ability to fight off any "potential deceleration in new housing in the future," he added. Finally, shares of GMS are down about 15% this year, and Loop sees a very "attractive" entry point. Patient investors should sit tight and ride out any near-term choppiness, according to Stevenson. VICI Properties Shares of the real estate investment trust and owner of casino properties are up about 5% since its fourth-quarter earnings report in late February when it beat analysts' revenue expectations. The company is also is "inflation-resistant," CBRE analyst John DeCree said in a recent note to clients. VICI agreed to purchase MGM Growth Properties last year. While the deal hasn't closed yet, DeCree said the deal should give the company even more consistent rental income to generate additional revenue. The company's "rent roll" is correlated to the consumer price index, so VICI will have "some form of CPI protection" as that inflation metric rises, the firm wrote. DeCree also says VICI tenants like Caesars and MGM continue to invest capital by "improving real estate quality." "VICI is already trading below replacement value, and the aforementioned capital improvements will widen that gap," he added. The firm is expecting more growth from a company it calls "a rock of comfort in uncertain times." "Inflationary pressures remain a key focus for investors, which is why we see VICI as a great investment opportunity even in the uncertain macro environment," DeCree said. Walmart The big-box retailer is taking the lead when it comes to fighting inflation, according to Goldman Sachs. The firm said earlier this week that its analysis shows Walmart is one of the most "well positioned" stocks in the fight against rising prices, particularly among food products. "As food inﬂation accelerated over the past year, WMT's market share in grocery broadly improved, while trafﬁc also shifted back to positive for the last three quarters which has been the main driver of the comp," analyst Kate McShane wrote. A grocery pricing survey conducted by the firm earlier this year also showed that Walmart had the lowest prices among a group of retailers including Albertsons, Whole Foods and Kroger. Walmart also has plenty of pricing power in order to maintain its competitive position should cost pressures persist, the firm added. McShane also noted that Walmart will continue to benefit from prior investments in technology and automation, enabling further high-margin business growth. "Given this market position, we anticipate continued trafﬁc and share gains for WMT as consumers across all income cohorts likely seek value in the current inﬂationary environment..." she wrote. Shares gained nearly 5.3% this week. Charles Schwab - Bank of America, Buy rating "On Tuesday, March 16th, the Federal Reserve began its rate hiking cycle by raising its target rate by 25bps with Fed Funds now sitting at 33bps up from 8bps (0-25bps range) before the hike. … SCHW is the inflation fighter. … SCHW is best-positioned for rising rates given its ~60% revenue contribution from interest rate sensitive revenues while we estimate Interactive Brokers is at #2 given its ~40% contribution and LPLA and HOOD lower." VICI Properties - CBRE, Buy rating "A rock of comfort in uncertain times. … Inflation- resistant REIT. Inflationary pressures remain a key focus for investors, which is why we see VICI as a great investment opportunity even in the uncertain macro environment. Once MGP closes, 90% of VICI's rent roll will have some form of CPI protection. … Inflationary pressures remain a key focus for investors, which is why we see VICI as a great investment opportunity even in the uncertain macro environment. … VICI is already trading below replacement value & the aforementioned capital improvements will widen that gap." GMS - Loop, Buy rating "On a relative basis, distribution is a better place to be right now than manufacturers given they are not as exposed to inflation pressures of higher energy and transportation costs. … We believe GMS is well positioned to benefit from continued near- to mid-term residential demand strength and weather any potential deceleration in new housing in the future. … We feel GMS is well positioned moving forward given a healthy near- to mid-term residential backdrop, improving commercial environment and elevated margin profile and current prices offer long-term investors an attractive entry point into the stock." Global Payments - Baird, Outperform rating "We are designating GPN as a Fresh Pick. We like that sentiment remains weak, while Merchant trends seem good/improving. Industry data and GPN comments at a recent conference both seem good, and enough to at least offset Russia/fx headwinds. In addition, GPN likely continues to benefit from inflation, and to soon starts benefiting from the Visa credit interchange reduction for SMBs. We think investors will start looking at C2024 by May, when GPN reports Q1....high-teens EPS growth is attractive!" Walmart - Goldman Sachs, Buy rating "In the rising food inﬂation environment, WMT is well positioned. … As food inﬂation accelerated over the past year, WMT's market share in grocery broadly improved, while trafﬁc also shifted back to positive for the last three quarters which has been the main driver of the comp. … Given this market position, we anticipate continued trafﬁc and share gains for WMT as consumers across all income cohorts likely seek value in the current inﬂationary environment, and we are starting to hear about some consumer behavior shifts within grocery."