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Goldman Sachs says to buy these 25 stocks with high pricing power as executives warn of elevated and potentially persistent inflation on earnings calls

Published by Business Insider on Mon, 19 Jul 2021


<p><img src="https://static2.businessinsider.com/image/60f0a050016a320018836861-988/GettyImages-163161012.jpg" border="0" alt="Traders react by high fiving at the end of trade at the New York Stock Exchange in New York," data-mce-source="EMMANUEL DUNAND/AFP via Getty Images" data-mce-caption="Traders react by high fiving at the end of trade at the New York Stock Exchange in New York," data-link="https://www.gettyimages.co.uk/detail/news-photo/traders-react-by-the-end-of-trade-at-the-new-york-stock-news-photo/163161012'adppopup=true"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Amid a blockbuster earnings season and a strong restart of the economy, <a href="https://www.businessinsider.com/inflation-trades-how-to-hedge-strategies-for-fed-meeting-policy-2021-6">inflation</a> is the ultimate bogeyman in the market.&nbsp;</p><p>A fresh batch of <a href="https://www.bls.gov/cpi/#:~:text=The%20Consumer%20Price%20Index%20(CPI,U.S.%20and%20various%20geographic%20areas.">consumer price index</a> data last week saw prices paid by consumers for goods and services jump 0.9% month-over-month and 5.4% year-over-year, the biggest one-month increase since 2008.</p><p>Similarly, the <a href="https://www.bls.gov/ppi/">producer price index</a>, which measures the prices companies receive for the goods they produce, rose 1.0% month-over-month and 7.3% year-over-year.&nbsp;</p><p>"Inflation has increased notably and will likely remain elevated in coming months before moderating," Federal Reserve chairman Jerome Powell said in <a href="https://www.banking.senate.gov/imo/media/doc/Powell%20Testimony%207-15-21.pdf">testimony</a> before the Senate Banking Committee on Thursday.&nbsp;</p><p>While Powell believes that the uptick in inflation is transitory, the chief executives of major blue-chip companies are increasingly skeptical and are <a href="https://www.businessinsider.com/inflation-concerns-ceos-major-companies-jamie-dimon-larry-fink-earnings-2021-7'nr_email_referer=1&amp;utm_source=Sailthru&amp;utm_medium=email&amp;utm_content=Opening_bell&amp;utm_campaign=Post%20Blast%20%20:%2010%20things%20before%20the%20opening%20bell&amp;utm_term=10%20THINGS%20BEFORE%20THE%20OPENING%20BELL%20-%20ENGAGED%2C%20ACTIVE%2C%20PASSIVE%2C%20DISENGAGED#pepsico-cfo-hugh-johnston-3">voicing their concerns</a>.&nbsp;&nbsp;</p><p>JPMorgan Chase chief executive Jamie Dimon <a href="https://www.businessinsider.com/inflation-concerns-ceos-major-companies-jamie-dimon-larry-fink-earnings-2021-7'nr_email_referer=1&amp;utm_source=Sailthru&amp;utm_medium=email&amp;utm_content=Opening_bell&amp;utm_campaign=Post%20Blast%20%20:%2010%20things%20before%20the%20opening%20bell&amp;utm_term=10%20THINGS%20BEFORE%20THE%20OPENING%20BELL%20-%20ENGAGED%2C%20ACTIVE%2C%20PASSIVE%2C%20DISENGAGED#blackrock-ceo-larry-fink-2">said on a July 13 earnings call</a> that inflation "could be worse than people think" and "a little bit worse than what the Fed thinks."</p><p>Larry Fink, who leads the $9.5 trillion money manager BlackRock, told the <a href="https://www.ft.com/content/4731cfa6-1a19-466b-b56d-73ef543932c5">Financial Times</a>: "In conversations with business leaders, they are seeing higher commodity prices and some are raising their prices and wages." BlackRock itself <a href="https://www.businessinsider.com/blackrock-raises-pay-compensation-director-employees-wall-street-careers-2021-7">raised the base pay</a>&nbsp;for staffers at the director level and below by 8%.</p><p>And then there are executives who explicitly said they are raising prices due to higher inflation.&nbsp;</p><p>"Is there somewhat more inflation out there' There is," <a href="https://markets.businessinsider.com/stocks/pep-stock">PepsiCo</a>'s chief financial officer Hugh Johnston said on an earnings call on July 13. "Are we going to be pricing to deal with it' We certainly are."</p><p><a href="https://markets.businessinsider.com/stocks/cag-stock">Conagra Brands</a>' chief executive Sean Connolly <a href="https://www.bloomberg.com/news/articles/2021-07-13/conagra-ceo-sees-more-price-hikes-amid-atypical-inflation">told Bloomberg</a> that the "atypical level of inflation" is the "highest inflation level our company has seen in as many years as we can remember."</p><p>"Will Conagra take list pricing increases' The short answer is, yes," Connolly said on a July 13 earnings call. "And we have more pricing coming."</p><p>Facing inflationary pressures, popular consumer brands such as <a href="https://markets.businessinsider.com/stocks/gis-stock">General Mills</a>, <a href="https://markets.businessinsider.com/stocks/pg-stock">Procter &amp; Gamble</a>, and <a href="https://markets.businessinsider.com/stocks/kmb-stock">Kimberly-Clark</a> have <a href="https://money.yahoo.com/these-companies-that-are-jacking-up-prices-because-of-surging-inflation-194542023.html">all said</a> they plan to raise prices. The <a href="https://www.businessinsider.com/inflation-ceos-consumer-packaged-goods-companies-raising-prices-consumers-2021-7">list of CEOs sounding warnings</a> on higher prices for everything from pantry essentials to industrial materials goes on.&nbsp;</p><p>But it's one thing to raise prices and another thing to keep customers loyal amid sudden price hikes.</p><p>Whether inflation proves to be transitory or persistent, it is the companies that can actually pass on inflation costs to customers and maintain stable profit margins that ultimately survive and thrive through multiple market cycles.</p><p>To that end, Goldman Sachs' global investment research team has screened for stocks of companies with high and stable gross margins relative to their sector peers. Those 25 stocks, along with their tickers, market caps, and their consensus 2021 gross margin metrics, are listed below.&nbsp;</p><h3>1. Activision Blizzard</h3><img src="https://static2.businessinsider.com/image/60f1c9e17b0ec5001800a843-400-300/1-activision-blizzard.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/atvi-stock">ATVI</a></p><p><strong>Market cap</strong>: $72 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 76%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>2. Cable One</h3><img src="https://static3.businessinsider.com/image/60f1d58e7b0ec5001800a8a3-400-300/2-cable-one.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/cabo-stock">CABO</a></p><p><strong>Market cap</strong>: $12 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 71%</p><p><em>Source: Goldman Sachs </em></p><p>&nbsp;</p></p><br/><br/><h3>3. Verizon Communications</h3><img src="https://static3.businessinsider.com/image/60f1d5f97b0ec5001800a8ab-400-300/3-verizon-communications.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/vz-stock">VZ</a></p><p><strong>Market cap</strong>: $232 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 60%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>4. Etsy</h3><img src="https://static5.businessinsider.com/image/60f1d85071757b0018c6a1e7-400-300/4-etsy.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/etsy-stock">ETSY</a></p><p><strong>Market cap</strong>: $25 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 74%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>5. Capri Holdings</h3><img src="https://static3.businessinsider.com/image/60f1d8c171757b0018c6a1ea-400-300/5-capri-holdings.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/cpri-stock">CPRI</a></p><p><strong>Market cap</strong>: $8 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 64%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>6. Under Armour</h3><img src="https://static4.businessinsider.com/image/60f1d99a71757b0018c6a1f9-400-300/6-under-armour.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/uaa-stock">UAA</a></p><p><strong>Market cap</strong>: $10 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 49%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>7. Advance Auto Parts</h3><img src="https://static1.businessinsider.com/image/60f1da4371757b0018c6a1fe-400-300/7-advance-auto-parts.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/aap-stock">AAP</a></p><p><strong>Market cap</strong>: $14 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 45%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>8. Tempur Sealy International</h3><img src="https://static2.businessinsider.com/image/60f1dadf7b0ec5001800a8d4-400-300/8-tempur-sealy-international.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/tpx-stock">TPX</a></p><p><strong>Market cap</strong>: $8 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 45%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>9. Carter's</h3><img src="https://static1.businessinsider.com/image/60f1db9e71757b0018c6a204-400-300/9-carters.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/cri-stock">CRI</a></p><p><strong>Market cap</strong>: $5 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 45%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>10. LKQ Corporation</h3><img src="https://static4.businessinsider.com/image/60f1dbfa7b0ec5001800a8d8-400-300/10-lkq-corporation.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/lkq-stock">LKQ</a></p><p><strong>Market cap</strong>: $15 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 40%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>11. Williams-Sonoma</h3><img src="https://static3.businessinsider.com/image/60f1dc7971757b0018c6a20f-400-300/11-williams-sonoma.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/wsm-stock">WSM</a></p><p><strong>Market cap</strong>: $12 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 41%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>12. Tractor Supply Company</h3><img src="https://static4.businessinsider.com/image/60f1dcd571757b0018c6a214-400-300/12-tractor-supply-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/tsco-stock">TSCO</a></p><p><strong>Market cap</strong>: $22 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 35%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>13. Dollar General Corporation</h3><img src="https://static6.businessinsider.com/image/60f1dd4571757b0018c6a217-400-300/13-dollar-general-corporation.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/dg-stock">DG</a></p><p><strong>Market cap</strong>: $52 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 32%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>14. Travel + Leisure</h3><img src="https://static2.businessinsider.com/image/60f1dda97b0ec5001800a8e8-400-300/14-travel--leisure.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/tnl-stock">TNL</a></p><p><strong>Market cap</strong>: $5 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: N/A</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>15. Philip Morris International</h3><img src="https://static2.businessinsider.com/image/60f1e06b71757b0018c6a22e-400-300/15-philip-morris-international.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pm-stock">PM</a></p><p><strong>Market cap</strong>: $155 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 68%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>16. Colgate-Palmolive Company</h3><img src="https://static4.businessinsider.com/image/60f1e0d57b0ec5001800a8fc-400-300/16-colgate-palmolive-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/cl-stock">CL</a></p><p><strong>Market cap</strong>: $70 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 61%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>17. Procter & Gamble Company</h3><img src="https://static4.businessinsider.com/image/60f1e4557b0ec5001800a920-400-300/17-procter-and-gamble-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pg-stock">PG</a></p><p><strong>Market cap</strong>: $335 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 51%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>18. Flowers Foods</h3><img src="https://static5.businessinsider.com/image/60f1e13871757b0018c6a236-400-300/18-flowers-foods.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/flo-stock">FLO</a></p><p><strong>Market cap</strong>: $5 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 48%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>19. Hershey Company</h3><img src="https://static3.businessinsider.com/image/60f1e18b71757b0018c6a23b-400-300/19-hershey-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/hsy-stock">HSY</a></p><p><strong>Market cap</strong>: $37 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 46%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>20. McCormick & Company</h3><img src="https://static1.businessinsider.com/image/60f1e23471757b0018c6a244-400-300/20-mccormick-and-company.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/mkc-stock">MKC&nbsp;</a></p><p><strong>Market cap</strong>: $23 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 41%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>21. Williams Companies</h3><img src="https://static4.businessinsider.com/image/60f1e2b471757b0018c6a24a-400-300/21-williams-companies.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/wmb-stock">WMB</a></p><p><strong>Market cap</strong>: $32 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 71%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>22. ONEOK</h3><img src="https://static1.businessinsider.com/image/60f1e3237b0ec5001800a916-400-300/22-oneok.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/oke-stock">OKE</a></p><p><strong>Market cap</strong>: $26 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 32%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>23. Kinder Morgan</h3><img src="https://static4.businessinsider.com/image/60f1e37071757b0018c6a253-400-300/23-kinder-morgan.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/kmi-stock">KMI</a></p><p><strong>Market cap</strong>: $42 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: N/A</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>24. Zoetis</h3><img src="https://static2.businessinsider.com/image/60f1e3d87b0ec5001800a91b-400-300/24-zoetis.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/zts-stock">ZTS</a></p><p><strong>Market cap</strong>: $94 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 70%</p><p><em>Source: Goldman Sachs </em></p></p><br/><br/><h3>25. Danaher Corporation</h3><img src="https://static5.businessinsider.com/image/60f30be47b0ec5001800aa68-400-300/25-danaher-corporation.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/dhr-stock">DHR</a></p><p><a href="https://markets.businessinsider.com/stocks/zts-stock"></a><strong>Market cap</strong>: $198 billion&nbsp;</p><p><strong>Consensus 2021 gross margin</strong>: 60%</p><p><em>Source: Goldman Sachs</em></p></p><br/><br/>
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