7 stock picks as inflation soars
- Inflation just hit a 40-year high, with the consumer price index rising 7.9% in February.
- Kevin Kelly says investors view real estate as a hedge against inflation.
- ETF chief Kelly shared 7 stocks and REITs that can withstand inflation due to short-term leases.
Inflation soared to 7.9% in February, its highest level in four decades, according to the latest Consumer Price Index report.
And there could be more pain to come after US President Joe Biden banned imports of Russian oil and gas following Vladimir Putin’s invasion of Ukraine – and warned that Americans would feel the ‘rise Putin prices” at the gas pumps over the next few months.
This leaves investors struggling with how to deal with sustained price increases. Some will buy pricing stocks, others will look to safe-haven assets like gold, while a few will invest in cryptocurrencies like bitcoin.
For Kevin Kelly, there is another asset class that retail investors tend to overlook when trying to hedge their portfolios against inflation: real estate.
“Real estate is one of the most underrated inflation hedges we have today,” said Kelly, who recently launched two ETFs that trade on the New York Stock Exchange under the symbols HOTL and RESI, to Insider in a recent interview. “Institutional investors are pouring in tons of money, but the average investor doesn’t appreciate the role it can play in their portfolio.”
“These are long-term games that will really benefit a portfolio five years from now,” he said.
Hotels and accommodation
Kelly ETFs’ two real estate funds track the hospitality and residential housing sectors. Kelly said both industries can adjust to higher inflation because their short-term leases give them significant pricing power.
“Apartments and rentals are one-year leases, and hotels are one-night leases, giving them the best pricing power of any real estate,” he said. “They can reprice in the short term, which makes it an incredible inflation hedge.”
Kelly added that the hospitality sector is also benefiting from the reopening rally, after a temporary shutdown sparked by fears of the Omicron variant.
“We see the hotel space performing very well, especially given the Omicron variant,” he said. “Our largest companies have performed exceptionally well during the earnings season.”
Kelly shared four real estate stocks to buy to hedge a portfolio against inflation — as well as three REITs, or real estate investment trusts, which are companies that finance and operate income-generating properties. Individual investors can buy individual shares of REITs on the stock exchange, making them more liquid than traditional real estate investments.
Insider breaks down Kelly’s thoughts on the seven stocks and REITs to buy as an inflation hedge over the next few years below. Each of them belongs to either the HOTL or the RESI ETF.