Some investors are weary of buying into stocks when the S&P 500 index is trading near its all-time high and has also made new highs recently, but that doesn’t mean all stocks are overpriced or not worth considering. Today’s list of stocks will offer investors a chance to align their portfolios with the current scenarios playing out in the economy, or at least the expectations for the coming quarters.
These stocks will benefit from the potential of rising inflation in the United States economy. Most thought this trend was over after the Federal Reserve (the Fed) stepped in to tame inflation spikes with higher interest rates. However, two of Wall Street’s best now think an inflation trade might be on, and that’s why investors need to consider these stocks today.
Making this list is an exporter in the basic materials sector 3M (NYSE: MMM) to benefit from a potentially weaker dollar ahead to boost exports in the United States. Then, shares of DoorDash Inc. (NASDAQ: DASH) might see their fee collections rise as the price of deliveries and items delivered reward them as the middleman. Finally, inflation in fuel costs might make electric vehicles a more attractive alternative for users, where Tesla Inc. (NASDAQ: TSLA) comes into play.
Could Manufacturing Comebacks Bring 3M to Its Former Glory?
Now that the manufacturing PMI index is running on a 23-month consecutive contraction, new policy coming from the Fed might turn this losing streak around for stocks in the space. Why? Recent rate cuts have sparked curiosity as to whether inflation might make a comeback, and here are two traders who think it will.
In recent Bloomberg and CNBC interviews, respectively, Stanley Druckenmiller and Paul Tudor Jones have expressed their interest in shorting bonds (pro-inflation views) and buying commodities across the board (also pro-inflation views). This means that the dollar might give up some of its gains for the year.
This trickles into cheaper American exports for other nations, who will have a relatively stronger currency on a dollar decline to consider buying. This is where 3M stock’s upside comes into play, a factor reiterated by Wall Street analysts today.
Specifically, those at Melius Research recently upgraded their ratings on 3M stock from a “Hold” to a “Buy,” bringing their price targets to a high of $180 a share. To prove these analysts right, 3M stock would need to rally by as much as 43% from where it trades today, not to mention a new 52-week high.
It seems some institutional investors got into 3M stock ahead of the potential rise, as seen in the new $172.4 million stake taken by those at International Assets Investment Management as recently as October 2024.
Why Inflation Could Boost DoorDash Stock: Analysts Weigh In
Just like insurance companies, which collect higher premiums as the value of the items they insure goes up with inflation, DoorDash is set up to benefit from these same trends as well. Even though the stock already trades at a new 52-week high, there are reasons to expect it to break into a new ceiling in the coming quarters.
Why? Inflation will not only help DoorDash become an attractive alternative to those weighing fuel costs and time that could be spent working on outpacing inflation, but it will also help the company collect higher fees, which are computed from the value of the items being delivered.
This may be one reason why analysts at Jefferies Financial Group decided to reiterate their “Buy” rating on DoorDash stock while also placing a much higher $180 share price target for the company, up from a previous $155 valuation.
According to this view, DoorDash could rally as much as 17% from its current price, which would also deliver a new 52-week high.
Tesla Stock is Shifting Ahead of Inflation Pressures
After its recent quarterly earnings report, Tesla stock jumped by over 20% in a week. Still, analysts don't think the bull run has run out of steam just yet. New ratings from Piper Sandler and an "Overweight" view suggest that Tesla stock could reach $315 a share, calling for a 17% upside after an impressive rally.
If inflation is due to come back up in the coming quarters, then the cost of gasoline and oil changes will also go higher, which would make Tesla the perfect alternative to counteract these costs. Anticipating the potential demand, Tesla has made a deal that is so economical for buyers that investors can't help but consider this stock a buy.
Offering leases for Model 3 Tesla cars for as little as $250 a month is one way to help the consumer beat inflation. Even if they have to return the car at the end of the lease, it doesn't matter, as the fuel savings and rising car payments today would have been more than worth it.
A bet on inflation is a bet on Tesla making a new high for the year, and Abrdn Plc knows this. As of October 2024, they increased their stakes in Tesla stock by 9.5%. This new addition would net their holdings at up to $735 million today, giving markets another vote of confidence.
