Why Inflation Still Feels Like Its Running Hot
Plus where to find "portfolio protection" and what's next for Bitcoin ...
In this issue of Stock Picker’s Corner (SPC):
Maybe inflation has been running hotter all along.
What can protect you if prices start creeping higher.
And one Bitcoin (BTC) expert believes this run leads to $200,000.
💸Why Inflation Still Feels Like a Problem
You might not know the the name Ronald Baron. But take it from us, the octogenarian investment pro is the real deal.
He’s worked in the markets for half a century. He founded and still runs the New York-based Baron Capital — a fund company with more than $45 billion in assets under management. And he’s got a net worth of $5.2 billion.
So Baron is a guy worth listening to.
Just now … he’s saying that U.S. inflation feels hotter than “the numbers” tell us.
And according to an anecdote in Barron’s, the fund manager is backing his assertion.
At the 31st annual Baron Investment Conference, a handout spotlighted the price changes the 81-year old has experienced “over the past 75-plus years for homes, cars, gasoline, college tuition, steaks, and even golf caddy fees.”
Although the government’s “official” stats reported a 3.5% inflation rate during that long stretch, Baron believes it was more likely between 4.5% and 6.5% annually.
“I don’t predict wars, I don’t predict Bitcoin, I don’t predict currency prices, I don’t predict whose going to become president,” Baron said at the conference. “The only thing I predict is inflation…everything doubles in price about every 14 or 15 years.”
Baron says investing is the best way to counter inflation’s wealth-eroding power. His preferred method: Growth stocks.
While there are lots of ways to screen for the best stock plays, Chief Stock Picker Bill Patalon likes to use projected earnings growth as a starting point for his analyses because of the generally positive correlation; higher stock prices tend to follow earnings growth.
Earnings growth for the S&P 500 is a projected 12.20% next year. So I’m going to share just a few examples of the companies from previous SPC issues that are expected to easily outpace that growth.
A favorite silver stock from Peter Krauth, publisher of the Silver Stock Investor, is the streaming company Wheaton Precious Metals Corp. WPM 0.00%↑. As a streamer or royalty firm, Wheaton purchases a percentage of the metals produced by a mine so that it isn’t sinking money into mine operations and has predictable costs. Earnings are expected to grow 30.13% next year.
Vertiv Holdings Co. VRT 0.00%↑ offers something for every stage of a data center’s lifecycle. Its modular offerings allow companies to expand capacity quickly. It also markets cooling solutions and management and monitoring tools. Earnings are expected to grow 30.93% next year.
And Hallador Energy Co. HNRG 0.00%↑ started out as an oil-and-gas explorer, evolved into a coal firm, and is undergoing another makeover — shifting this time into renewables and actual power production. Earnings growth next year is expected to weigh in at a massive 151.61%.
🟡Commodities to the Rescue
Sticking with the inflation storyline, another area of allure is commodities.
That’s because with rising demand and supply constraints often coinciding with inflation, commodities offer portfolio “protection.”
When the consumer price index (CPI) averaged 8% for 2022, the S&P 500 dropped 19%. But the Bloomberg Commodity Index climbed 14%.
Our good friend Danny Brody — who runs The Net Worth Club here on Substack — is heading a team that’s working to acquire a copper mine … a fact that gives him unique insights. He recently focused a long-range “lens” on commodities and shared his outlook for gold, oil, and copper. Hint: That “outlook” is positive.
👀Whats Next for Bitcoin (BTC)
When the price of Bitcoin was $67,000 on March 4, our friend and crypto expert David Zeiler issued a bold prediction: Bitcoin would breach $100,000 in December.
As I penned this, with Bitcoin trading at $98,000, he’s just $2k shy of that target … and that’s a 46% gain for folks who followed along in in a little more than eight months.
But for anyone who thinks they missed the “Bitcoin bus,” Dave says you didn’t miss anything. We asked him for his latest insights.
Here’s what he told us.
“I still see the price getting into the $200,000 neighborhood over the next year. With President Trump in office, and assuming he follows through on some of his promises, that could happen a few months sooner than it would have under a Harris administration. There’s a good chance you’ll double your money in less than a year.”
Dave believes the best way to invest in Bitcoin is to buy Bitcoin. But for folks who don’t want to deal with setting up an account on an exchange and then keeping their crypto safe, he suggests looking into Bitcoin ETFs.
“As for which of the new ETFs to focus on, I’d say stick with the big names,” Dave told us. “They’ll have the most liquidity and are the least likely to run into issues down the road. They’re also attracting the lion’s share of inflows. Here I’m talking about Blackrock’s iShares Bitcoin Trust IBIT 0.00%↑, or Fidelity’s Wise Origin Bitcoin Trust FBTC 0.00%↑ … each of which has low fees and dominant inflows in the early days.
Take care,
