2 Stock Picks to Hedge Against Rising Inflation

Barrick Gold, Alimentation Couche-Tard, and Canadian Natural Resources look attractive, as rising inflation rates cause many worries.

| More on:

As inflation fears begin to pick up, volatility in stock markets will rise and lead to uncertainty for investors. It might take some time to determine exactly how the markets will respond. Still, it would be wise to consider making some defensive investments to protect your capital.

Most investors worried about their capital are in a hurry to sell stocks and move their money to fixed-income or safe-haven assets. However, not all stocks suffer substantial losses during inflationary market conditions.

I will discuss three defensive stocks that you can consider adding to your portfolio to hedge against inflation.

Barrick Gold

Gold is widely considered to be the safest commodity to protect capital against inflation. Gold producers like Barrick Gold (TSX:ABX)(NYSE:GOLD) are excellent picks for investors who do not want to exit the markets but want to invest in defensive assets during inflation.

Gold prices typically tend to rise as the overall stock market declines. Gold producers like Barrick Gold can offer investors an ideal way to leverage rising gold prices without exiting the stock market. Rising commodity prices can allow Barrick Gold to enjoy greater margins. Being one of the top global gold producers, it has high-quality and diversified mining operations across 10 countries and mines a wide range of metals.

Investing in the gold stock could help you capitalize on rising gold prices without buying the rare yellow metal itself, keeping your invested capital more liquid.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) can be another excellent pick to consider adding to your portfolio during a market with rising inflation. Higher inflation rates lead to things becoming more expensive for consumers. Companies that can manage to pass on the rising costs to their consumers can generate more substantial profit margins and greater overall cash flows.

Canadian Natural Resources is an energy sector operator that could become an ideal addition to your portfolio for this purpose. The integrated energy business boasts a diverse product portfolio that it can use to consistently generate cash flows. The current market environment is adding industrial tailwinds for the energy sector, allowing companies like Canadian Natural Resources the opportunity to recover from last year’s losses.

CNQ boasts a stronger balance sheet than most of its peers. The company’s management had an excellent handle on cost management during the worst period of the pandemic in 2020. It came as no surprise that the company raised shareholder dividends last year when its peers were forced to suspend payouts. Its reliable dividend payouts and defensive qualities in the current market conditions make it an excellent asset to consider adding to your portfolio.

Foolish takeaway

Rising inflation rates typically tend to adversely affect returns from equity securities, sending investors scrambling to find safer alternatives to park their capital to hedge against inflation. However, not all stock returns go down during inflation. Barrick Gold and Canadian Natural Resources are all excellent picks in an inflationary atmosphere for you to consider.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »