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3 Best Stocks for Hyperinflation

23 Sep 2022

3 Best Stocks for Hyperinflation | VI College

We’re all familiar with what inflation means, but do you know what hyperinflation is? It is a “rapid, excessive, and out-of-control general price increases in an economy.”

Think of it this way: hyperinflation is the worst version of inflation. While inflation tackles the speed at how much the price of commodities is increasing, hyperinflation is the rapid spike of price increases.

To better put it into context: the Bureau of Labor Statistics uses the Consumer Price Index (CPI) to assess the strength of the dollar. On the other hand, the CPI is a price index of more than 90,000 commodities and services.

So, how, then, do we determine if inflation is high?

The Federal Reserve aims to preserve a healthy inflation rate of about 2%. The economy is relatively manageable as long as general rates fall within or roughly around that percentage. If an inflation rate exceeds 2%, then that’s considered high. Still, we don’t consider it hyperinflation.

For hyperinflation to take place, prices have to exceed more than 50% a month. For example, if a regular gallon of grocery store milk costs $5 in, say, the month of June, then hyperinflation is when that same gallon of grocery store milk costs $11 in July of the same year.

Is hyperinflation here?

The quick answer is no, but the honest answer is it isn’t exactly impossible. The worst case of hyperinflation happened in Hungary. It started in August of 1945 and ended in July of the following year. During that time, the inflation rate rose to over 200% on a daily basis.

Talk about an economic nightmare!

Hyperinflations often only take place when countries are typically unable to produce the goods and services expected from them. As such, this isn’t precisely a regular occurrence.

Is hyperinflation worse than a recession, then?

Right off the bat, the answer is yes. Hyperinflation is the worst economic shape a country can conform to. It eliminates the value of assets and money in general. Meanwhile, a recession simply eliminates from society easy access to acceptable standards of living.

Although both scenarios are horrible, hyperinflation is much more unimaginable and impactful for nations of all types.

Nevertheless, it’s important that we take the necessary steps to prepare ourselves for a recession or hyperinflation. That said, one of the first questions you can ask today is, “what are the best stocks for hyperinflation?"

Which stocks can beat hyperinflation?

Investing in stocks has been a go-to strategy for those big on money management and wise spending. This is because, when done right, stocks have the power to increase your capital, making you wealthier and more prepared to brave rainy days.

But before that, let’s discuss what type of stocks best beat hyperinflation. For starters, millions of investors rely on dividend stocks as these types of stocks assure shareholders a regular percentage from their shares. Simply put, dividend stocks make for superb passive income.

For instance, say, you have 1000 shares from Pepsi—which sells for $172.99 (31 August 2022) a share, by the way—then your earnings from the stock’s annual dividend yield alone is about $4,601.

If you’re wondering how we arrived at that number, we simply multiplied 1000 by 172.99

(1,000 shares x 172.99 stock price = $17,2990).

We then used the sum of that equation and computed how much 2.66%, Pepsi’s annual dividend yield as of 31 August 2022, of that amount was.

Furthermore, in this example, you have the option to either bounce with the cash or reinvest your profits. Naturally, the more shares you own, the bigger your revenue is.

All things considered, let’s talk about the 3 best stocks for hyperinflation.

1. Devon Energy (NYSE:DVN)

    3 Best Stocks for Hyperinflation | VI College

    If you’re unfamiliar with Devon Energy Corporation, you can probably already tell from the company name alone that it’s an energy giant. Founded in 1971, it has an estimated 1,700 employees and carries an impressive market capitalisation worth $46 billion.

    Should hyperinflation ever happen, you’ll be pleased to know that the demand for oil and natural gases will remain. As a result, you’ll want to patronise companies that warrant a market regardless of how tough economic times are.

    Devon Energy may be a fantastic choice for you because its annual dividend yield comes in strong at 6.56% (31 August 2022). And considering a stock only sells for $71.08 a share (31 August 2022), it’s still relatively affordable. The company also boasts a 39.31% operating income margin, signifying its profitability.

    2. Advanced Micro Devices Inc. (NASDAQ:AMD)

      Tech company Advanced Micro Devices produces computer parts integral for processors and graphics. Unlike Devon Energy, however, AMD doesn’t pay dividends.

      So why is it on the list?

      During hyperinflation, only commodities like food and energy will be in high demand. At a time like this, growth stocks like AMD will take a back seat. When this happens, its stock price will plunge. In other words, investing in growth stocks is the perfect opportunity for value investors to work their magic.

      Nevertheless, this move isn’t for everyone. The idea of value investing thrives only in the bigger picture, and for you to succeed, you’ll have to think long-term. When the economy self-corrects and improves over time, growth stocks like this one will regain their intrinsic value, making your shares more expensive than you bought them for.

      AMD’s market capitalisation exceeds the $140 billion mark, and it sports a comfortable 5.73% return on equity (ROE), proving that investors are fairly pleased.

      3. Walmart Inc. (NYSE:WMT)

        3 Best Stocks for Hyperinflation | VI College
        Source: Chekyravaa / Shutterstock

        It doesn’t matter where you’re from in the world, Walmart is a retail brand that’s cemented its name in the market. As such, it should come as no surprise that investing in Walmart stock during hyperinflation could be a bright and calculated step.

        It presently towers tall with a market capitalisation of $360 billion, and a 4.99% return on assets (ROA) which means that the consumer goods giant is maximising its assets smartly. Should hyperinflation take place, groceries will still be packed and the demand for food will still be strong.

        That said, buying Walmart shares as early as today could be a promising move. At less than $133 a share (31 August 2022), the stock is fairly valued and arguably one of the more affordable picks compared to its contemporaries. A 1.69% annual dividend yield isn’t bad either.

        Whatever your primary investing strategy is, it’s nice to know that there are stocks that are sure to align with your values—whether or not hyperinflation does happen. Even then, you must do your due diligence and individually determine if the examples above suit your risk tolerance and stock preferences.

        That aside, you’ll also want to make sure that you work on building good money management habits today. That way, when push comes to shove, and it will, you’ll have enough to fund the rainy days.

        Tips to prepare for a hyperinflation

        Here are 4 ways to help you get through hyperinflation.

        Save as much as you can

          Although the power of the dollar will weaken by the day in hyperinflation, that doesn’t mean it’s going to lose all value. As a result, you’ll want to be as liquid and cash-prepared as possible. The best way to do this is to double up on your savings today.

          Work on building an emergency fund and store your savings in a high-yield savings account. This way, your money still earns interest while it’s simply waiting for you to spend it. It’ll also help exponentially if you increase your streams of income. The more money you expect from clients and employers, the easier it will be for you to reach saving objectives.

          Diversify your portfolio

            During hyperinflation, the stock market will be at its most vulnerable. As such, many stocks will rise and many will plunge embarrassingly. When you run a diversified portfolio, you lessen the risk of losing it all.

            When and while you can, invest in stocks, bonds, and even real estate investment trusts (REITs). What matters most now is that you’re doing all that you can to grow your money.

            Stock up on non-perishable goods (or grow a garden)

            3 Best Stocks for Hyperinflation | VI College

              We get it. Not everyone has access to luscious greenery at the back of their homes.

              Nonetheless, container vegetable gardening is slowly gaining traction from apartment owners and renters. Obviously, this isn’t the soundest advice here but it sure helps when you can grow your food. If hyperinflation does happen, the fight for affordable food will be scarce and starvation levels will rise. For those very reasons, having vegetables in your pots or gardens will definitely shield you from hunger.

              Stocking up on non-perishable goods like instant ramen and canned goods isn’t a bad idea as well.

              Keep calm

                This is arguably one of the most cliché pieces of advice, but if there’s anything we’ve picked up from Warren Buffett, it’s that economic seasons don’t last forever. There will be famine but there will also be abundance.

                It can be challenging to ride out recessions and hyperinflations, but when you do come out alive, your investments will only work to your advantage.

                Are you interested in being more financially secure? Click this link to join our free investment workshop!


                This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

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