Inflation Is Not Going Away. 2 Stocks That Will Thrive, 1 That Will Dive

​​​Inflation is here to stay. While down from the historically high levels hit over the past year or so, inflation rates remain elevated and are wearing on the economy. U.S. business activity slowed to a four-month low this month, which has worried the Federal Reserve.

It was looking to cut interest rates at least three times this year, possibly as many as six times, but now it’s not sure it will even do it once. Fed Chairman Jay Powell recently said he had no “confidence” that inflation would head in the right direction, and there has even been talk of raising rates again to temper inflation’s growth.

Inflation is insidious to consumers as it erodes their spending power. The same dollars buy less at the store. And it is all because of government spending with no politician exhibiting the will to rein it in. 

And yes, some businesses can thrive in a high-inflation environment. Their operations can profit because of the damage it causes to businesses and consumers. Below are two inflation stocks that should do well as high rates persist. There is also one stock that is most at risk.

Iamgold (IAG)

As inflation makes a new move higher, the price of an ounce of gold sits near all-time record highs. It is unsurprising to see miners like Iamgold (NYSE:IAG) benefitting. The stock is up 45% year to date, and there is potential for shares to grow even more.

Although costs are rising, profit margins should rise more, especially now that Iamgold had its first pour from Cote Gold. All-in sustaining costs (AISC) grew to $1,762 per ounce sold in 2023 from $1,582 per ounce sold the year before, an 11% increase, but Cote Gold should dramatically lower them.

Cote Gold is a new mine that Iamgold has been developing, and management believes it could be the third-largest gold mine in Canada. The miner says once the project achieves 90% of throughput, which it expects will happen by the end of 2024, it estimates its cash costs at that time will be in the range of approximately $700 to $800 per ounce sold and AISC of $1,100 to $1,200 per ounce sold. That will significantly lower Iamgold’s overall AISC.

With stubborn inflation, gold will remain elevated, and miners like Iamgold will profit.

Genuine Parts (GPC)

Source: Piotr Swat / Shutterstock.com

Inflation has made the cost of a new car prohibitively expensive. Used cars are no longer a bargain either. That’s why aftermarket auto parts retailers like Genuine Parts (NYSE:GPC) shine in this environment.

According to Cox Automotive, the cost of a new car in April is $47,244 on average. While that’s down 2% from last year, it is significantly above their pre-pandemic level. Used car prices are also rising again in 2024, hitting $26,969. That’s down 4% from last year, but they are closing in again on the record highs hit in 2022.

It is why Genuine Parts is thriving. Car owners want to keep their existing cars on the road longer. The owner of the NAPA Auto Parts retail chain reported $5.8 billion in first-quarter revenue and beat expectations on the bottom line with earnings of $1.78 per share. That had management boosting its full-year profit guidance to $9.80 to $9.95 per share, a 1% increase from its previous outlook at the midpoint.

That might not seem like much, but Genuine Parts is a mature company that will not have wild swings. It also pays a dividend that yields 2.4% annually. It has paid a dividend ever since going public in 1948 and has raised the payout for 68 consecutive years.

Chipotle Mexican Grill (CMG)

Source: Retail Photographer / Shutterstock.com

Restaurants are one industry most at risk from inflation because the cost of dining out becomes uneconomical compared to eating at home. Despite rampant inflation, Chipotle Mexican Grill (NYSE:CMG) has been a standout performer over the past few years. Yet persistence in higher prices, which could also lead to a deferral in interest rate cuts by the Federal Reserve, could eventually take a toll.

Chipotle’s armor has been its value proposition for a differentiated menu. The fast-casual chain offers consumers something different (and better) for their money, but when consumers feel pinched more for longer, they will start cutting back. That extra meal picked up through at a Chipotlane drive-thru window can easily be cut out.

Because the Mexican food chain’s stock has quadrupled in value over the last five years, it has the furthest to fall. CMG stock is up 66% since its low point last October, but shares could quickly retrace that route.

On the date of publication, Rich Duprey held a LONG position in GPC stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.