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During periods of high inflation like the current one, consumers tend to be more selective about what they buy. That means discretionary items, like expensive vacations, may be thrown away. But some things, like health care, aren’t easy to sacrifice. With this in mind, there are two inflation-resistant stocks I’d like to buy today.
health
Health care stocks are seen as recession-proof. When I get sick, I have to see a doctor and buy medicine. The companies that develop and sell these products continue to make money. One example of a company that tends to do well regardless of economic conditions is AstraZeneca (LSE: AZN).
Pharmaceutical giants are now the biggest FTSE 100 companies by market capitalization (£180bn). The stock is up 131% in five years.
The drug maker’s total revenue is set to rise 41% year-on-year to a record $37.4bn in 2021. Even excluding sales of the Covid vaccine, revenue will still be up 23% compared to 2020.
This is because AstraZeneca currently has 13 blockbuster drugs. This is a product that generates more than a billion dollars annually. But the company is investing heavily in research and development ($9.7 billion in the last fiscal year) for its next-generation potential blockbuster.
The stock still looks quite attractively valued to me, with a forward price-to-earnings ratio (P/E) of 19. Plus, it pays a dividend yield of 2%.
Health insurance
For the second stock, I’m going stateside. And especially for the health insurance board, where UnitedHealth Group (NYSE: UNH) is a dominant force.
The company offers a wide range of important healthcare products and services. This includes medical coverage, which is obviously important no matter what happens in the economy.
Unfortunately, I never had this stock. That’s my regret, because it has been a monster champion over any significant time I care for the name.
| Time frame | Stock price performance (excluding dividends) |
| 3 years | +64% |
| 5 years | +101% |
| 10 years | +774% |
| 20 years | +2.247% |
The reason for this stock price appreciation is that UnitedHealth Group’s fundamentals are solid. It serves more than 146 million customers, processing 1.1trn health-related bills annually.
The company is expected to exceed $357 billion next year, with a forecast net profit of $23.4bn.
This gives the stock a forward P/E of 19. I don’t think that the price is particularly daunting for such a high quality company.
One short-term risk for both stocks is that inflation may have peaked. This could lead to a rotation from inflation-resistant stocks to more neglected cyclical sectors. However, even if inflation is cooling, it is unlikely to fall to the central bank’s 2% target in the short term.
The bigger picture
The average global population is living longer. In fact, one in six people in the world will be over 65 years old by 2050, according to the United Nations. That’s up from one in 11 people in 2019.
Clearly, the demand for global healthcare will only increase in the coming decades. So both stocks look good to me during the important investment period – long term.
I would have bought both of those stocks today if I hadn’t allocated the capital to other investments.
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