During periods of high inflation like now, consumers tend to be much more selective when it comes to what they buy. That means discretionary items, like expensive holidays, may well be jettisoned. But some things, such as healthcare, can’t be so easily sacrificed. With this in mind, here are two inflation-resistant stocks I’d like to buy today.
Health
Healthcare stocks are seen as relatively recession-resistant. When I’m sick, I need to see a doctor and buy medicine. The firms that develop and sell those products continue to make money. One example of a company that tends to do well regardless of economic conditions is AstraZeneca (LSE: AZN).
The pharmaceutical giant is today the largest FTSE 100 company by market cap (£180bn). The stock is up 131% over five years.
The drugmaker’s total revenues increased by 41% year on year to a record $37.4bn in 2021. Even excluding its Covid vaccine sales, revenue would have still have been up 23% compared to 2020.
That’s because AstraZeneca now has 13 blockbuster drugs. These are products that each generate more than a billion dollars of revenue each year. But the firm is investing heavily in research and development ($9.7bn in its last fiscal year) for the next generation of potential blockbusters.
The stock still looks quite attractively valued to me, with a forward price-to-earnings (P/E) ratio of 19. Plus, it pays a dividend yielding 2%.
Health insurance
For my second stock, I’m heading stateside. And particularly to the health insurance space, where UnitedHealth Group (NYSE: UNH) is a dominant force.
The company offers a broad array of vital healthcare products and services. This includes medical coverage, which is obviously essential regardless of what’s happening within the economy.
Unfortunately, I’ve never owned this stock. That’s to my regret, because it has been a monster winner over any significant time period I care to name.
| Time period | Share price performance (excluding dividends) |
| 3 years | +64% |
| 5 years | +101% |
| 10 years | +774% |
| 20 years | +2,247% |
The reason for this share price appreciation is that the fundamentals of UnitedHealth Group are rock-solid. It serves more than 146m customers, processing over 1.1trn health-related billings annually.
The company is expected to surpass $357bn in revenue next year, with forecast net profit of $23.4bn.
This gives the stock a forward P/E of 19. I don’t think that valuation is particularly daunting for such a high-quality company.
One short-term risk to both stocks is that inflation may have peaked. This may cause a rotation away from inflation-resistant stocks towards more neglected cyclical sectors. However, even if inflation were to cool, it’s unlikely to drop to the 2% target of central banks any time soon.
The bigger picture
The global population is living longer on average. In fact, one in six people in the world will be over the age of 65 by 2050, according to the United Nations. That’s up from one in 11 people in 2019.
Clearly, global demand for healthcare is only going to increase in the coming decades. So both stocks look good to me over the only investing time frame that matters — the long term.
I’d buy both of these stocks today if I hadn’t already allocated capital to other investments.
