Inflation-Proof Stocks Let You Down – Buy These Instead

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Joe Walters, manager of the Royal London UK Equity fund, warned that inflation was causing problems not only for these companies’ customers, but also within their own supply chains.

“Last year, inflation rose much more and the cost of raw materials poses a challenge for consumer goods companies,” he said.

Star fund managers Terry Smith and Nick Train both invest heavily in consumer goods giants.

Fundsmith Equity counts cosmetics giants L’Oreal and Estée Lauder in its top 10 holdings. He also has a stake in Unilever, although Mr Smith has criticized the company’s management for its stance on social and governance issues.

However, last week he told investors at his annual shareholder meeting that he remained confident in the power of the company’s brand. “It is the biggest, if not the second biggest consumer goods company in India, Indonesia and Nigeria,” he said. “Also known as highly populated parts of the emerging world. It should be a company that can perform better.

The Lindsell Train Global Equity fund counts Diageo as its largest holding and also owns other consumer giants Mondelez, PepsiCo and Unilever.

But while those managers backed the companies for their “quality” status, David Kneale of asset manager Mirabaud said that was what had hurt their stock prices in recent months. “It’s part of the investment style rotation,” he said. “Rising interest rates make expensive quality stocks, such as those found in the consumer goods sector, much less attractive.”


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