Bernstein says these global stock picks will outperform — even as inflation fears grow

Published Thu, Apr 7 202210:20 PM EDT

Bernstein has named a raft of global stock picks to navigate higher-for-longer inflation. Inflation has remained rampant over recent months, with the U.S. consumer price index rising 7.9% from a year ago in February, the highest level since 1982. Eurozone inflation also hit a record high of 7.5% in March. Yet, inflation did not hurt margins last year, according to Bernstein. Indeed, analysts at the bank said in a note published Wednesday that corporate margins soared to all-time highs in the U.S, and continued to rise in Europe. However, the analysts, led by Sarah McCarthy, said they anticipate margins will be hit this year amid slowing growth and sustained inflation. "We are now well into a second year of very high inflation, and the timing around when inflation will moderate is highly uncertain," McCarthy said. "Historically, margins have been resilient in the initial stages of an inflation spike, but longer-term inflation has a more detrimental effect on margins." Bernstein also noted that while the economy remains strong, it is starting to slow. Gross margin — the percentage of revenue after accounting for the cost of goods sold — is a closely-watched profitability metric. It can be used to determine a company's pricing power (its ability to maintain or raise prices without hitting demand), making it particularly important in the current inflationary environment. Companies with high pricing power tend to weather inflationary periods better than their competitors because they can pass on higher costs to customers. Read more Ron Baron says buy growth stocks to beat inflation These strong pricing power stocks are set to beat the market, UBS says Wall Street analysts say these stocks are their favorite 'inflation fighters' Stock picks Against this backdrop, Bernstein said companies that have pricing power and resilient margins in the face of high costs and an economic slowdown are key. To determine the stocks with the highest pricing power, the bank screened for stocks that grew their gross margins over the last two years and have exhibited gross margin stability over the past seven years. The bank's screen turned up consumer goods companies Nestle , L'Oreal and Danone , luxury goods firms LVMH , Richemont and Moncler , as well as a host of healthcare companies that include Roche , Siemens Healthineers , Coloplast and Fresenius . Two tech firms — software giant SAP and chipmaker Infineon Technologies — made Bernstein's list too. ABB , Swedish industrial conglomerate Assa Abloy , Dutch information services firm Wolters Kluwer and French industrial gas supplier Air Liquide round up the bank's picks.

Economies around the world are struggling to tamper runaway inflation, as consumer prices continue to hit new highs in the U.S. and Europe.

Wang Ying | Xinhua News Agency | Getty Images

Bernstein has named a raft of global stock picks to navigate higher-for-longer inflation.