Stocks You Should Purchase Because of Low Inflation
Midway through 2022, U.S. inflation reached 40-year highs. Still, new reports indicate that the Federal Reserve’s relentless interest rate increases have finally caused inflation to fall toward its long-term target of 2%. The previous year has seen many equities struggle, but certain businesses have been more negatively impacted by inflation than others. Recently, Bank of America evaluated the companies in its coverage universe to find those that had outperformed during periods of low inflation. A relief bounce in these equities might start in early 2023 due to declining inflation.
Amazon.com Inc. (AMZN) – is a global leader in cloud computing and e-commerce. In 2022, inflation reduced Amazon’s revenues, causing the corporation to fire 18,000 employees in January. But according to analyst Justin Post, Amazon is a big stock buy when inflation slows. According to Post, Amazon’s value is at its lowest point in a decade, and reduced inflation will assist in improving the atmosphere for consumer purchasing. According to Post, Amazon’s profit multiples may increase if the Fed switches its policy to rate reductions in late 2023 or 2024. Amazon stock currently has a “buy” rating and a $135 price target from Bank of America.
The O’Reilly Auto Inc. (ORLY) – One of the most significant car parts and accessories dealers in the United States is O’Reilly Automotive. O’Reilly fared exceptionally well in 2022, but traditionally, the company has done best when inflation is down. According to analyst Elizabeth Suzuki, O’Reilly is the finest auto parts retailer and has a lengthy history of producing peer-leading identical sales growth. The mean lifespan of a car in the United States has reached a record high of almost 12 years, which is great news for auto parts merchants. The shares of ORLY are given a “buy” recommendation by Bank of America, with a $920 price objective.
Ross Stores Inc.(ROST) – One of the biggest off-price shops in the United States is Ross Stores Inc. (ROST). Consumers’ available income is reduced by inflation, which hurts retail purchases. Despite a 3% decline in same-store sales in the third quarter, according to analyst Lorraine Hutchinson, Ross has intense inventory levels going into the shopping season, and traffic patterns are improving. According to Hutchinson, Ross has a lengthy expansion history across various economic conditions. The business may have even increased its market share when inflation drove consumers away from more expensive rivals. The shares of ROST are given a “buy” recommendation and a $125 price target by Bank of America.
Kroger Company (K.R.) – One of the most prominent grocery merchants in the U.S. is Kroger. Kroger has done a great job of controlling inflation-related expenses while maintaining competitive prices, according to analyst Robert Ohmes. In actuality, Walmart Inc. (WMT(a )’s bargain store) prices were only around 8% higher in 2022 than those at Kroger. In the upcoming quarters, Ohmes anticipates Kroger to continue producing earnings beats and improving its projection. Ohmes claims that Kroger’s loyalty program and gasoline benefits are attractive to customers in an inflationary market, and the company has seen a significant increase in higher-income consumers. The stock of K.R. is given a “buy” rating and a $75 price target by Bank of America.
Ball Corp (BALL) – One of the biggest manufacturers of aluminum packaging for the food, drink, personal care, and home goods sectors is Ball. If the United States can avoid a significant recession in 2023 and inflation will not reaccelerate, which would reduce the company’s profits, analyst George Staphos believes Ball is positioned to prosper. According to Staphos, glass and plastic bottles are losing market share to beverage cans, and the company’s long-term contracts provide investors with financial transparency. He anticipates free cash flow in 2023 to be $427 million. The stock of BALL is given a “buy” rating and a $61 price target by Bank of America.
Home Depot Inc. (H.D.) – One of the biggest home improvement retailers in North America is Home Depot. Suzuki claims that despite rising prices, Home Depot has networked embedded rising inflation and maintained high profitability. Suzuki forecasts 2% same-store sales growth this year, while Home Depot is well-positioned to increase its profits when inflation declines in 2023. Despite the recent slowdown in the home industry, Home Depot is still profiting from high demand from business clients. According to Suzuki, spending on house improvements should continue to be higher than before the epidemic. For H.D. stock, Bank of America has a “buy” recommendation and a $360 price target.
Lowe’s Cos. Inc. (LOW) – Another home improvement shop, Lowe’s, is Home Depot’s main rival. If prices continue to decline, Lowe’s, like Home Depot, will be in a position to increase its margins in 2023. After the stock delivered a total return that quadrupled the S&P 500’s from 2018 to 2022, Suzuki claims that Lowe’s CEO Marvin Ellison and the remainder of the Lowe’s management team who joined the business in 2018 deserve a “victory lap.” According to Suzuki, Lowe’s is one of the retail industry’s most attractive investments for shareholders seeking a return. The stock of LOW is given a “buy” grade and a $278 price target by Bank of America.
NVR Inc (NVR) – A US house builder is NVR. Rising mortgage rates due to high inflation have reduced home market demand. In the fourth quarter, orders for NVR decreased 27% year over year. According to analyst Rafe Jadrosich, NVR’s average sale price was up 1% from a year earlier, which is especially good given that many homebuilders are slashing pricing. Because NVR didn’t suffer as big of an order spike in 2020 and 2021 as some other homebuilders did, according to Jadrosich, the company’s order figures will hold up relatively well in 2023. The stock of NVR gets a “buy” rating and a $6,000 price target from Bank of America.
