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Inflation and interest rates are forming a dark cloud over the stock market. This is a pair of stocks that may not care.
With the dark cloud of inflation and interest rates threatening the stock market, choosing which ASX stocks to buy has never been more important.
The well-known investment company Sage Capital recently held a briefing for its clients and listed 2 specific stocks that its analysts believe can withstand external forces.
Portfolio manager Kelli Meagher said that reading the "crystal ball" is not how the Sage team works.
"We manage our portfolio to diversify macroeconomic risks as much as possible, so we can focus on our stock selection."
She added that in general, growth stocks are susceptible to rising interest rates.
"But this doesn't mean that all growth stocks will be in trouble."
Although no company is completely immune to economic forces, here are two companies that illustrate the types of companies that have unique attributes that can help investors.
Meagher said her team now likes the appearance of James Hardie Industries plc (ASX: JHX).
"This is a very high-quality company with a very long-term growth trajectory. It will do well regardless of the bond yield in the short-term."
James Hardie "ticked a lot of boxes" in the way Sage screened ASX stocks. Selling fiber cement products, it is in a growing industry that is gaining market share and controlling its own prices.
"It's not just about selling goods like bricks. There is IP [intellectual property] in the manufacturing process, which is a trade secret," Meagher said.
"Therefore, it is difficult for competitors to replicate James Hardie fiber cement boards."
The biggest growth driver is the US residential construction industry, which provides the company with a huge potential market.
So far, James Hardie's stock price has risen 42.9% in a year.
The mineral business Orocobre Limited (ASX: ORE) is another stock that looks resilient to the Sage Capital team.
The important thing is that it produces lithium chemical products. As the world moves towards net zero, lithium chemical products are an important component of battery manufacturing.
According to Sean Fenton, managing director of Sage, Orocobre achieves “higher profits” by processing virgin lithium into secondary chemicals that are more useful to its customers.
"They continue to invest in downstream refining capacity... This is a considerable return on capital."
Despite being classified as a miner, its contribution to the renewable energy transition makes Orocobre one of the good guys.
"It has a strong ESG focus and culture. We think this is in a good position on the global cost curve because the strong lithium price in the future will bring cash flow," Fenton said.
"They are really hot right now."
So far this year, Orocobre's stock price has more than doubled. They started 2021 with a mid-term of $4, but they were trading at $9.36 at the close on Wednesday afternoon.
When investment expert Scott Phillips has a stock alert, it can pay to listen. After all, his flagship Motley Fool Share Advisor newsletter, which he has operated for more than eight years, has provided twice, three times or more stock selections to thousands of paying members. *
Scott just revealed what he thinks might be the five best ASX stocks investors are buying right now. These stocks are trading at very low prices, and Scott thinks they may be good choices now.
*Returns as of August 16, 2021
Motley Fool writer Tony Yoo does not hold a position in any of the above-mentioned stocks. Motley Fool Holdings Inc., the parent company of Motley Fool Australia, has no position in any of the aforementioned stocks. Motley Fool Australia has no position in any of the aforementioned stocks. The Motley Fool has a disclosure policy. This article only contains general investment advice (according to AFSL 400691). Authorized by Bruce Jackson.
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