Praetorian Capital: Playing Inflation Part 2

There’s been a big slowdown in inflation data over the past year. While that’s good news, investors may want to price in the possibility that inflation will remain high for some time. Getting the last of inflation out of the economy may take some work from here.

Investors don’t have to worry about a big market decline like last year. But inflation lasting higher for longer could lead to a slow market. That’s fine, as long as investors know the strategy to take to thrive.

That strategy is to focus on a company with a competitive durable advantage.

Also known as a moat, the concept focuses on a company’s industry leadership and the quality of its products. That keeps lower-priced competitors at bay, especially in a weaker economy.

A company with a strong moat can raise prices above inflation and not lose much in the way of business.

One classic example is the Coca-Cola Company (KO). The beverage company is one of the best known global brands. And while a single can of Coke is cheap, it tends to be priced slightly higher than that of competitors and far above store brands.

Investors can also focus on hard assets with real cash flows and a valuation that more than covers replacement costs. Those companies can also fare well if inflation stays higher for longer.

To read the full analysis, and two additional stock ideas, click here.