Three blue-chip stocks that can remain unfazed by inflation woes

Summary

  • In the wake of rising inflationary pressure, the commodity prices tend to move consistently up, which bodes well for the BHP Group.
  • Xero is a AU$19.9 billion online accounting software provider, with its client base ranging from small to large businesses.
  • Woolworths is a supermarket giant which is well positioned to take advantage of the economic recovery.

The ASX 200 has been in a continuous fall, marking its third consecutive day in the negative zone. On Monday, the benchmark index hit a new 52-week high of 7172.8, after which the market sharply reversed it direction. As of 10:35 AM AEST, the ASX 200 is trading 0.58% lower at 7004, losing a total of 2.3% from its 52-week high.

Image Source: ID 212692848 © Zimmytws | Megapixl.com

The primary reason has been higher-than-expected US inflation, which rose 4.2% in April 2021 over the previous year, sparking concerns for a higher interest rate environment. This massive surge in inflation has triggered a market-wide panic, leading to a heavy sell-off in benchmark indices.

However, this is the time to look at fundamentally robust companies or blue-chip stocks, which have a visible future and are more capable to withstand this market sell-off. We have compiled a list of three such stocks.

Read More: US Consumer Prices Rise By 4.2%, The Fastest Pace Since 2008

  1. BHP Group Limited (ASX:BHP)

BHP Group is a large cap Australian miner, having a market capitalisation of over AU$150 billion. In the wake of rising inflationary pressure, the commodity prices across the board, tend to move consistently up. In today’s scenario, copper, palladium, iron-ore etc. prices are trading near record levels, which would help miners to pocket some supernormal profits in the coming quarters.

Image Source: ID 13135374 © Teprzem | Megapixl.com

In the recent quarterly report, BHP increased its copper guidance to a range of 1,535 kt – 1,660 kt, reflecting stronger-than-expected performance at its Escondida mine. At the end of March 2021, BHP had four major projects under development which are still being worked upon.

The BHP share price closed at AU$51 on Wednesday, a few ticks below its 52-week high of AU$51.8.

  1. Xero Limited (ASX:XRO)

Xero is a AU$19.9 billion online accounting software provider, with a broad client base ranging from small to large businesses. In FY21, the company has increased its revenue by 18% to AU$848.8 million on the back of a record second half-year subscriber additions.

The FY21 result reflected continued momentum in Australia and New Zealand together with a notable recovery across Xero’s international markets. International net additions in H2 FY21 of 155,000 more than trebled compared to H1 FY21. Over the full year, its total global subscribers increased by 456,000 or 20% to reach 2.74 million.

XRO last traded at AU$134.88 on Wednesday, up by 2.25% from the previous closing of AU$131.91.

  1. Woolworths Group Limited (ASX:WOW)

With a market capitalisation of around AU$51.3 billion, the supermarket giant is well positioned to take advantage of the economic recovery on the back of increased consumer spending. As reflected by the recent Q3 FY21 earnings report, the company’s eCommerce sales continued to grow strongly, surging 64.2% in Q3 to AU$1.3 billion. In Australian Food, WooliesX eCommerce sales increased by 90.5% to AU$878 million with penetration of 7.9% compared to 4.1% in the prior year and 7.7% in H1 F21.

Image Source: ID 17886239 © Dudau | Megapixl.com

Comparisons to Q3 F20 have been favourably impacted by disruptions to some eCommerce services following unprecedented demand last year. However, the management estimates that eCommerce sales growth would still have exceeded 70% on a normalised basis.

The WOW share price closed at AU$40.50, compared to the previous closing of AU$40.94.

Read More: Woolworths Group (ASX:WOW) marks a strong start to FY21, online sales and net profit go higher


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