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Berenberg Bank Lists 'Winner' Stocks to Benefit During Inflation

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Apr. 14 2021, Updated 12:09 p.m. ET

Global sectors in basic resources, chemicals, banks, and energy will benefit from rising bond yields and inflation, according to analysts with Berenberg Bank. 

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Berenberg has picked several stocks that it expects to increase over the next decade, despite the rise in inflation, CNBC reported. 

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Berenberg winners have potential of over 15 percent

Berenberg’s inflation stock “winners” all have an upside potential of 15 percent or more, CNBC reported. The bank put together its list of buy-rated picks after running stock screens for the U.S., Japan, Europe, and other regions. 

All of Berenberg's stock picks have positive correlations with their respective 10-year bond yields and strong EPS growth and cash flow. 

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Berenberg names stocks to play in an inflation rise

According to CNBC, Berenberg’s winning stocks include:

For large-cap European firms, Berenberg analysts like Associated British Foods (owner of grocery brands and clothing company Primark) and oil firm BP. These stocks have positive correlations with 10-year German bond yields—the European equivalent of U.S. Treasury bonds. In other words, the stocks performed well when bond yields were rising. The analysts also liked the companies’ strong EPS growth and cash flow, CNBC reported. 

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For small to mid-cap European firms, British investment manager St. James’s Place is a top pick on Berenberg’s list of small to mid-cap firms. 

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When looking at large Japanese companies, chemicals firm Asahi Kasei and electronics company Panasonic are Berenberg's favorites with positive correlations with 10-year Japanese bond yields, strong EPS growth, and solid balance sheets. Yamaha Motors made the list for mid and small-cap Japanese firms with positive Japanese bond-yield correlations.

In the U.S., Bank of America and General Motors are Berenberg’s top picks for large firms that correlate positively with 10-year bond yields and have positive EPS momentum and growth.

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British firms Compass and Barclays are Berenberg’s favored picks for large U.K. firms with “positive” correlations with 10-year U.K. bond yields and positive EPS growth.

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Berenberg analysts point to an eventual rise in yields and inflation rates

In a note to CNBC, Berenberg analysts said that a 40-year downtrend in developed countries’ 10-year bond yields coincided with a 40-year downtrend in inflation rates across the developed world.

“Our economists believe that inflation rates have troughed and will pick up in the next six months before rising gradually over the next decade. This would imply higher bond yields too,” Berenberg analysts told CNBC.

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The bank urged investors to “find ways to hedge higher bond yield risk in their portfolios.” The yield on the benchmark 10-year Treasury note was at 1.634 percent early on April 14, in anticipation of Federal Reserve Chairman Jerome Powell’s upcoming appearance at The Economic Club of Washington to discuss the economic recovery from the pandemic, CNBC reported.

On April 13, key inflation data came in slightly higher than expected and not as bad as some feared, CNBC reported. Labor Department figures show that the consumer price index, a core measure of inflation, rose 0.6 percent in March on the previous month.

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