Brad’s Note: Right now, it might feel like there’s nothing you can do to safeguard your wealth.
Inflation continues to eat into your purchasing power… Stocks have had a terrible year so far, down over 20%… And there seems to be nowhere to safely park your money and grow it.
That’s why I’m reaching out to one of my top analysts, Stephen Hester, to help guide you through this uncertainty.
Stephen managed money at two hedge funds, won risk-management awards as a professional trader, and was director of due diligence at two financial services firms. Both managed more than $100 billion in client assets.
In short, he’s done it all. And just like me, he’s made safety the cornerstone of his investing approach. Today, he’ll share what average investors can do to protect their principal and grow their wealth in today’s market environment…
U.S. inflation reached a new 40-year high of 9.1% in June. That means you need to earn nearly 10% on your savings or investments just to break even.
And conservative savings options are offering table scraps. A five-year certificate of deposit (CD) pays 0.87% and a five-year Treasury Note is below 4%.
Simply put, there’s no risk-free way to fight this level of inflation.
Stocks are usually good hedges against inflation. That’s because many companies can pass on cost increases to consumers.
The one exception is if inflation arrives at the same time as a recession, which is exactly what many fear is happening now… Consumers worried about their jobs save more and spend less. That’s not great for most stocks.
It’s no surprise that the S&P 500, the benchmark for U.S. stocks, is down nearly 25% from recent highs. Near double-digit inflation and a weakening economy will do that. And many investors fear the stock market has farther to fall.
Sitting on the sidelines isn’t a good option, either. No one I’ve met has a good track record of “picking the bottom.” And we’ve all heard how high inflation can wreck retirement plans and economies.
What we thought was an old history lesson from the 1970s on economics is staring us right in the face (and right in our brokerage accounts)…
Let History Be Your Guide to Protect Against Inflation
That means we need to choose investments that battle inflation but hold their value during tough economic times. History lessons from past inflationary cycles like the 1970s can teach those willing to learn.
Real estate, for example, has been a time-tested hedge against inflation and a way to preserve wealth for not only decades, but centuries. That’s because the amount of land or buildings at any given time is simply limited, while government spending and central bank printing are not.
That’s not the only reason. Many types of real estate also generate healthy rents from tenants. And those rents tend to rise with inflation over time…
Real estate is likely to hold up better than most asset classes. That’s a great start. But knowing the different sub-sectors – and individual players within them – that are likely to perform well is better. Anything else is leaving money on the table.
Fortunately, we specialize in exactly that at Wide Moat Research.
Since real estate investment trusts (REITs) are professionally managed, well diversified, and publicly traded, they are our go-to source for real estate investments. And they’re especially well-suited for today’s environment.
REITs that can re-price rents the fastest have an advantage. Self-storage facilities and apartment buildings are great examples. As inflation rises, they can quickly adjust rents higher. That’s how their costs usually rise at a lower rate, or may not change at all, which spells greater profitability.
REITs with properties that are costly to replace benefit, too. Anyone who wants to compete with a new building faces much higher costs. That makes existing REITs more valuable.
By focusing on the best companies in the best real estate sub-sectors, investors can not only fight inflation, but even profit from it.
The Best Opportunity on My Radar Today
Over our long history, Brad and Wide Moat have published well over 1,000 articles on REITs. And our close relationship with many REIT CEOs gives us unique insight into the market.
So you know you’re in capable, experienced hands when it comes to our REIT research.
This leads me to the best name on my radar today, American Tower Corporation (AMT).
AMT has over 220,000 communication towers spread across the globe and is the largest REIT by market cap. Its unique model means it passes on many costs, including power and fuel, directly to its tenants, benefiting shareholders.
With 5G adoption increasing worldwide, AMT’s cell towers have never been in higher demand. Its largest tenants include Verizon and T-Mobile.
We know many companies, even some great ones, cut their dividend during the pandemic. But that wasn’t the case with AMT. Its quarterly dividend increased from $0.95 in Q4 2019 – right before the pandemic struck – to $1.47 quarterly last quarter.
That’s 64.6% dividend growth during the pandemic. And the company just raised it again by around 3% on September 22.
AMT is a great example of Wide Moat’s philosophy. Our goal is to find you the safest and fastest growing income streams. And that’s no matter what else is going on in the world.
Happy investing,
Stephen Hester
Analyst, Intelligent Income Daily