Inflation is on the rise across the globe as the price of gold, oil, silver, soybeans, and just about anything else not tied down, moves higher at an alarming pace. These three stocks should help your money combat third world-like inflation both here and abroad.
Bunge (BG) -- Bunge is a dirt cheap equity operating in the commodity and farming industry. Even though Goldman Sachs believes that Bunge's profit margins are going to be hurt because of soybean crush margins, we think the squid's fears are overblown to some degree given the company's large margin of safety on book value, and its diversification into commodities like Potash. Bunge looks like a great investment for those looking to diversify into hard assets but are cautious about future investments and worried about storage costs associated with gold and silver. With Bunge you are also buying one dollar of tangible book value for seventy cents. Look, if nightmarish dreams regarding the prospects for higher soybean crush margins wake you up in the middle of the night like me, maybe you should avoid equities altogether and own commodities and metals instead.
Vale (VALE) -- One of the cheapest mining plays in the world right now, Vale is worth considerably more than its current share price suggests. There really is no direct motivation for nations to curb out of control deficits and leverage because of the poor state of the global economy. Joblessness necessitates spending by governments, say the so-called Keynesians out there. And to fix our incredible balance sheet problem by cutting spending, we risk destroying the prospects for economic growth, according to the mainstream view. The alternative view is that you cannot fix a debt and deficit problem with more debt. So long as governments print and borrow, Vale and Rio Tinto (RIO) should benefit in the form of rising earnings and per share book value. Vale is downright cheap at 5.8X earnings, 6.4X forward earnings, and spitting out a 4.6% forward dividend yield.
ConocoPhillips (COP) -- ConocoPhillips's marketing department has hit a chord with U.S. consumers on natural gas and domestic energy production. Natural gas is our country's greatest potential economic and environmental resource -- with prices so cheap in our country for "natty gas," there seems to be an urgency to finally move toward natural gas trucking, which would shelve something like one third of our demand for oil from the Middle East. Natural gas is less polluting than oil, but it seems many people have no problem arguing with that fact. ConocoPhillips also looks undervalued right now at eight times last year's earnings logging in solid revenue growth at 21% YOY and a 19% return on equity.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
