As investors try to grapple with what stocks to buy during inflation, the new sanctions on Russian oil are likely to add fuel to the fire. Despite a pullback in many commodities yesterday, valuations are still up significantly this year.

The Consumer Price Index (CPI), which measures how much consumers pay for goods, continues inching higher. In fact, the latest reading in January shows the highest annual increase since 1982.

Furthermore, when the price of goods increases, consumers have less to spend elsewhere, leading to a slowdown in growth. When this happens, it can have major effects on the stock market and the performance of certain assets.

With this in mind, certain sectors like energy tend to outperform while growth stocks feel the most pressure. If you are looking for what stocks to buy during inflation, keep reading and learn how to prepare your portfolio.

What Stocks to Buy During Inflation

No. 1 Energy

Nowadays, the commodity market is a hot topic, with gas prices reaching record levels. Investing in real assets, such as oil or metals, can be a great hedge for inflation.

When inflation is running high, the most important thing to ask yourself is, “what will hold its value or increase going forward?” In this case, it often comes down to essentials. For example, oil is an essential good. You need it to get to work, travel to the store, or for entertainment.

No matter how you look at it, oil is needed for the economy to continue growing. Even though electric vehicles offer an alternative, we don’t have the production capacity to meet the demand.

As a result, oil prices are soaring close to $120 per barrel leading to higher profits from oil companies like Exxon Mobile (NYSE: XOM). In fact, energy is the only sector positive this year, with the Energy Select Sector SPDR Fund (NYSE: XLE) up 32% YTD.

So far, energy stocks are proving to be one of the best stocks to buy during inflation. Yet oil is only one part of the equation. Here are a few other examples.

No. 2 Gold

During inflation, metals, particularly gold, have outperformed the market. To illustrate, when inflation grew 4.1% YOY in 2007, the highest in 17 years prior, gold outperformed the S&P 500 ETF (NYSE: SPY). Moreover, it continued outperforming the index through the great recession.

If you are looking to invest in gold, here are a few suggestions.

• Barrick Gold (NYSE: GOLD): Barrick is a leading gold mining company operating in over 13 countries. Most important, the company has the best-in-class tier-one gold assets. In other words, tier-one mines produce more gold at a lower cost and have a stated life of +10 years. GOLD stock is already up 30% this year but will look to take advantage of higher gold prices.
• SPDR Gold Trust (NYSE: GLD): If you are looking for more broad exposure to gold, you may SPDR GOLD Shares. With over $69 billion in assets, the ETF is the largest backed by physical gold. Even more, GLD is outperforming the SPY ETF by 20% in 2022.

Even though gold may not be the most exciting investment, it tends to hold its own during times of inflation. What’s more, the SPDR Gold ETF became the largest ETF in the world in 2011, during the debt ceiling crisis.

No. 3 Agricultural Inputs

Agriculture may not be the first thing that comes to mind when you think of what stocks to buy during inflation. But, again, the industry holds its value due to playing a critical role in society.

Although oil is getting all the attention, grains are also soaring to new highs. For instance, two food staples, wheat (+44%) and corn (+25%), are pushing food prices higher. But, to make a profit from these moves would require futures trading. Rather than taking the risk on futures, investing in agricultural inputs will generally follow the same trend.

• Mosaic (NYE: MOS): Several events are pushing Mosaic up 42% year to date. Mosaic is the world’s largest producer of critical minerals for fertilizer, such as potash and phosphate. Fertilizer prices are soaring with higher gas prices and the ongoing tension in Ukraine, increasing the value of Mosaic’s products. As a result, the mining firm is seeing higher earnings growth, with revenue advancing by double digits the past five quarters.

Another key point to consider, last March, the U.S. International Trade Commission (ITC) placed a tax on incoming fertilizer from Morocco and Russia. With this in mind, the move can benefit Mosaic for years to come as new sales are realized.

No. 4 Value Stocks

Investing in value stocks can be another excellent way to capture growth while inflation is high. For one thing, the reason these companies are labeled “value” is often due to the essential nature of their business. For example, insurance, banks, and consumer defensive can offer value.

But few know value better than the king of investing himself, Warren Buffet. His holding company, Berkshire Hathaway (NYSE: BRK.A), is up 8% this year, with investors looking for safety. With this in mind, the company’s top holdings include:

• Apple (Nasdaq: AAPL)
• Bank of America (NYSE: BAC) &
• American Express (NYSE: AXP)

Not only that, but Berkshire also owns Geico among railroads, chemicals, and other essentials. Owning a diverse company like Berkshire can give you peace of mind in most economic conditions.

The Secret to What Stocks to Buy During Inflation

Investing is not an easy thing to do with new headlines getting thrown in your face 24/7. But, the most important thing to keep in mind right now is owning essentials.

Think of things like commodities, natural resources, and energy. On the other hand, holding cash may seem like a smart move with the recent stock market volatility. But inflation makes goods more expensive, reducing the purchasing power of cash.

If you are looking for lower-risk, you can invest in Treasury Inflation-Protected Securities (TIPS). In other words, the sole purpose of TIPS is to increase in value with inflation.

Keep in mind the last time we saw inflation accelerate this fast was in the 1980s. This is a different market we are dealing with today than in the past several years.

Not to mention, the war in Ukraine is further pressuring global markets. Read more about what stocks to buy during war to see how your account aligns.

Now that you know what stocks to buy during inflation, you don’t need a complete portfolio makeover. A few minor adjustments will help your portfolio continue growing while the Fed moves to fight inflation.