Inflation and Interest Rates: 3 Stocks Set to Thrive in a Changing Economic Climate

At this point, investors are back to looking for inflation proof stocks to shield their portfolios. After closing 2023 on a bullish note, as an early Santa Claus rally sent markets back to all time highs, we’re entering 2024 on a muted note. The trading year began with two consecutive down days, putting a damper on reinvigorated bullish enthusiasm and sowing unease among traders.

A big pivot point for economic developments will be the holiday sales data. If we see renewed consumer enthusiasm and generally lower inflation, we can expect Fed policy to adjust accordingly. If there’s even a hint of danger flashing, though, then the Fed’s “higher for longer” regime will likely remain in effect.

In either case, uncertainty reigns. If you’re ready to deploy some New Year’s cash into the market but are nervous about growth stock prospects, these solid inflation proof stocks offer a viable alternative. Medtronic (MDT) Finding better options than tech or healthcare stocks when investing for the long term is challenging.

But, in many cases, both sectors combine volatility and risk with outsized gain potential. Unlike those speculative stocks, though, HealthTech firm Medtronic (NYSE: MDT ) is an inflation proof stock offering continued growth opportunity—a rare combo. Despite facing some difficulties during the pandemic, the company has a strong showing in 2023.

Most of Medtronic’s temporary performance decline came from cuts in elective and non emergent surgeries rather than material economic factors. However, the situation is increasingly stabilized, and Medtronic is recovering rapidly. In its most recent earnings report, the company achieved a 5% year over year increase in revenue, and its management has raised its annual forecast.

Medtronic’s growth potential comes from its unique position at the intersection of healthcare (an industry that continues to grow) and technology. For instance, the company collaborates with Nvidia (NASDAQ: NVDA ) to develop next generation, AI enabled diagnostic tools. Further reinforcing MDT’s inflation proof stock status, it offers a 2.9% total yield , and despite bouncing back recently, shares remain undervalued.

Conagra Brands (CAG) Conagra Brands (NYSE: CAG ) is a top player in the food industry, a well known inflation proof sector. Still, the food giant is consistently undervalued, mostly due to past (mis)management. But under current president and CEO Sean Connolly’s leadership, the inflation proof stock is well on its way to turning around for good.

Currently, the company is trading at around 1.5x book value, a reasonable indicator of undervaluation in this case. The company has increasingly improved its margins in recent quarters. That stands as a testament that Connolly and the team can adapt to higher interest rates and retain consumers amid inflation.

Better yet, the company is generating sufficient free cash flow to pay off $130 million of short term debt, reducing interest expenses and providing shareholders with a $157 million dividend. That commitment to shareholders keeps Conagra’s longstanding quarterly dividend trend rolling. Addressing its short term debt is a top priority for Connolly, and Conagra remains committed to delivering value to its shareholders.

This stock offers a compelling combination of growth potential as it improves its financial position, inflation proof qualities, and a stable income opportunity. Berkshire Hathaway (BRK A, BRK B) If you don’t want to pick single inflation proof stocks, you can always follow Warren Buffett’s lead by simply investing in Berkshire Hathaway (NYSE: BRK A , NYSE: BRK B ).

Berkshire Hathaway holds over 50 companies in its portfolio and invests in many more. These companies cover multiple inflation proof industries, including transportation, energy, and staple consumer goods. Undoubtedly, investing in Berkshire Hathaway provides an easy way to diversify your investments and inflation proof your portfolio without buying and betting on many individual stocks.

Investing in Berkshire Hathaway lets investors align with the Oracle of Omaha’s investment strategy and market outlook. For instance, Buffett’s skepticism caused him to divest his stake in Chevron (NYSE: CVX ) and other underperforming stocks to build a strong cash position in 2023—a movie that may prove prescient.

This internal “rebalancing” can serve as a shield for your portfolio against negative economic impacts. Simultaneously, you can benefit from Buffett’s expertise as he eventually deploys that cash in search of lucrative deals when companies face further challenges. Investing in Berkshire Hathaway is the simplest way to follow smart money.

Few investment managers have a track record as successful as Buffett and his team when selecting and managing companies. This solidifies Berkshire Hathaway’s position as a top inflation proof stock. On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines ..