Stick With Companies Capable of Growing with Inflation

While the market has been contending with the latest geopolitical headlines in the short-term, longer-term trends are still in play. That means high levels of inflation, whose growth may moderate later this year, but will likely still remain high.

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  • As one of the largest trends, investors should look at investing in companies that are capable of growing alongside inflation, rather than losing profit margin as customers start to look for cheaper bargains elsewhere.

    One area that should fare well is in payment processing companies. If consumers are paying more, more payments will be processed. It doesn’t matter if it’s due to inflation or from an increase in spending in real terms.

    Among the payment processing companies, Block (SQ) has been hit harder than the traditional credit card networks. It also has higher growth potential and more exposure to the rapidly-growing cryptocurrency payments space, which makes it look like a play on a number of key investment trends today. But analysts see it capable of growing as inflation does, even if transaction volume remains the same.

    Action to take: Investors may like shares here, given the company’s low financial leverage and 29 percent revenue growth rate over the past year, although shares are a long way from paying a dividend.

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  • Given the volatility in shares, traders may like the July $140 calls. Last going for about $6.25, the option can likely deliver mid-to-high double-digit returns in the coming months before expiration. Traders may want to close the trade out early after a pop higher in shares.


    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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