Inflation is still running hot. While that may change in the coming months, it will still take a long time to get back to a pre-pandemic level. Investors who are mindful of inflation know that they have a few ways to protect their wealth.
One way is with commodities. These are physical goods that have a real use as the building blocks of the economy, in everything from construction to food to energy.
While demand for these goods may decline in a recession, they always have an underlying value. And with improving technologies, they can find new ways to be used.
Right now, high energy costs are causing a big move higher for metals that need to be smelted. But a process for lowering energy use and the carbon footprint for aluminum production could bode well for industry leader Alcoa (AA).
The producer is already up 27 percent in the past year, but could end up faring even better as improving technology lowers the high cost of production.
Action to take: Shares of Alcoa look attractive as a play on commodity prices, as well as on its innovative potential to lower costs. Investors can also get a 0.7 percent dividend now.
For traders, the January $70 calls, last going for about $4.00, offer mid-double-digit returns in the coming months. Traders should look to lock in quick profits on a jump higher in shares in today’s volatile market.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.