"Inflation is coming" is now seen as a consensus conclusion. The debate currently is on whether it will be fleeting or sustained.
Penning my prelim thoughts on how and where to invest in an inflationary scenario.
Short thread 🧵
1/n
Penning my prelim thoughts on how and where to invest in an inflationary scenario.
Short thread 🧵
1/n
https://twitter.com/MultipieSocial/status/1391592597953519619
Inflation is defined as a sustained increase in the price of goods and services. Your investment returns must cover for inflation to avoid loss of purchasing power.
Reading: cnbc.com/2021/05/13/her….
Asset class wise thoughts below:
2/n
Reading: cnbc.com/2021/05/13/her….
Asset class wise thoughts below:
2/n
1. Equity:
A. Tech platforms: ❌
Inflationary scenario has historically been bad for growth stocks and Tech has had a ferocious rally. Despite recent correction, many names appear overvalued to me. Selectively hold 2 names.
3/n
A. Tech platforms: ❌
Inflationary scenario has historically been bad for growth stocks and Tech has had a ferocious rally. Despite recent correction, many names appear overvalued to me. Selectively hold 2 names.
3/n
https://twitter.com/SJosephBurns/status/1393216835512832003?s=20
B. Commodity plays ↔️
Not my strongest suite. Metal commodities have seen a good rally. Bullish on agro commodities given expectation of third consecutive good monsoon. Hold two agro-chem plays and one Ready-to-eat player linked to agri value chain.
4/n
Not my strongest suite. Metal commodities have seen a good rally. Bullish on agro commodities given expectation of third consecutive good monsoon. Hold two agro-chem plays and one Ready-to-eat player linked to agri value chain.
4/n
C. Dividend stocks🌱: Bullish
Investing in high dividend yield stocks & companies with cash rich balance sheet offers good headroom to keeping pace with inflation. Cash earns zero returns, defaltes ROE & cos. may want to reward shareholders in this time. Hold the meme stock.
5/n
Investing in high dividend yield stocks & companies with cash rich balance sheet offers good headroom to keeping pace with inflation. Cash earns zero returns, defaltes ROE & cos. may want to reward shareholders in this time. Hold the meme stock.
5/n
D. Real Estate: 🤔
In an inflationary scenario, RE is seen as a better hedge than Gold as per statistical data (views not developed).
+ive correlation between RE & inflation. With inventory pipeline, it may lead to better pricing. Not invested.
See chart via @MultipieSocial
6/n
In an inflationary scenario, RE is seen as a better hedge than Gold as per statistical data (views not developed).
+ive correlation between RE & inflation. With inventory pipeline, it may lead to better pricing. Not invested.
See chart via @MultipieSocial
6/n
E: Building Materials: 👍
Good demand across segments (roofing, piping, flooring, wires/ cables, etc). Unorganized to organized consolidation may finally be happening.
Has already seen some upmove, but expect more juice left. Hold 2 names & planning to increase allocation.
7/n
Good demand across segments (roofing, piping, flooring, wires/ cables, etc). Unorganized to organized consolidation may finally be happening.
Has already seen some upmove, but expect more juice left. Hold 2 names & planning to increase allocation.
7/n
F. Banking stocks: Cautiously optimistic
These can do well in an inflationary scenario. Subject to NPA risks. The real impact of second wave is an unknown risk for now. So would not recommend going big.
Allied reading: fool.com/investing/2021…
8/n
These can do well in an inflationary scenario. Subject to NPA risks. The real impact of second wave is an unknown risk for now. So would not recommend going big.
Allied reading: fool.com/investing/2021…
8/n
2. Fixed income:🥱
High yield Fixed income instruments such as bonds, commercial papers, etc with shorter duration and higher yields may be preferred over longer duration instruments. Risk of re-investment to be considered. More popular in HNI & institutional segments.
8/n
High yield Fixed income instruments such as bonds, commercial papers, etc with shorter duration and higher yields may be preferred over longer duration instruments. Risk of re-investment to be considered. More popular in HNI & institutional segments.
8/n
3. Crypto🤑
The blue eyed boy! One strong argument in favor of crypto is that it is inherently anti-inflationary (limited supply, unlike printing of Fiat). This is a more detailed topic I am currently studying and would hold views for now. But remember - Crypto ☠️ Doge
9/n
The blue eyed boy! One strong argument in favor of crypto is that it is inherently anti-inflationary (limited supply, unlike printing of Fiat). This is a more detailed topic I am currently studying and would hold views for now. But remember - Crypto ☠️ Doge
9/n
That's it folks. Sketchy thoughts drafted on the go. None of it is an investment advice. But views are invited to discuss and learn.
/end
/end
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