Inflation Is Becoming Anything but Transitory, but Here's One Stock to Like

Far from being temporary or transitory, inflation more and more seems to be persistent and all around us. The other day I took a walk to my local grocery store. On the way I passed a gas station where gasoline was going for $3.47 a gallon. Wasn't it just last year gas was under $2.00 a gallon or is my mind starting to play tricks on me? Fortunately, I only fill up once every four to six weeks, but one has to feel for the commuters among us. When I got to the store the meat counter was out of lamb, another impact of the supply chain and logistics problems around the world right now. Bacon was plentiful and still the $6.29 I am used to paying, but the amount in the package feels like it contains about one-third less bacon than in 2020. The cost of ordering groceries online isn't getting any cheaper, either, as the Whole Foods in my area has decided to implement a $10 delivery charge later this month. I am sure everyone in the Real Money Pro community has experienced their share of sticker shock over the past few months as prices seem to be surging everywhere right now, from used cars and HVAC systems to propane. This surge of inflation is playing out throughout the economy and the market. I have been saying throughout the year I have no exposure to commercial real estate in my portfolio. The continued persistence of the coronavirus and the growth of the virtual workforce during the pandemic have made office real estate significantly less attractive. This is especially true in major cities such as the Big Apple, which is now enforcing vaccine mandates that particularly will hurt small retailers and restaurants and the landlords that own those properties. The one exception to this is apartment-based REITs, which are benefiting from large increases in rent throughout the nation. These residential REITs rose just over 6% during the third quarter, while the overall REIT space posted a small decline over the same time. I expect this outperformance to continue in the months ahead as apartment leases continue to renew at higher rates. That's great for these REITs, but not so good for renters who will see a significant hit to their disposable incomes. We are starting to get into a self-reinforcing cycle as manufacturers and others pass on their increased costs to their customers. The home furnishing and building supplies sectors are bedeviled right now by raw material increases as well as the gumming up of the global supply chain. However, both sectors are still seeing strong demand. One name I am adding to my portfolio here on Monday is American Woodmark Corp. . American Woodmark shares are down by one-third from recent highs. Recent quarterly results missed expectations significantly due to what the maker of cabinets and vanities called evolving inflationary pressures outpacing its pricing actions taken across all its channels. In response, American Woodmark is in the process of pushing through a couple price increases of its own that should boost margins in the quarters ahead. Demand is certainly still there as American Woodmark saw percentage growth in the high teens in its repair and remodel sales channel as well as upper single-digit growth in its new construction sales channel last quarter. The stock is not expensive at around 10x next year's profit projections. The stock also looks like it is in the process of trying to put in a bottom, so I will be accumulated a stake incrementally.

Inflation Is Becoming Anything but Transitory, but Here's One Stock to Like

American Woodmark shares seem to be bottoming as the maker of cabinets and vanities puts through price increases of its own.

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