Although inflation in the United States seems to be cooling, the rate remains stubbornly high, still above the Federal Reserve’s target of below 2%.
Despite the decline, concerns persist that inflation is not yet entirely under control, prompting investors to seek assets that can offer protection. In this line, specific stocks, though not currently market dominants, provide this investment option amid inflation fears.
Therefore, Finbold turned to OpenAI’s latest artificial intelligence (AI) tool, ChatGPT-4o, to identify which underrated stocks might present investment opportunities.
Picks for you
W.P. Carey (NYSE: WPC)
First on the list is W.P. Carey (NYSE: WPC), a real estate investment trust (REIT) that the AI tool highlighted for its diversified portfolio. Many of its leases are linked to inflation, and it is involved in industrial, office, retail, and warehouse properties. ChatGPT-4o noted that this diversity ensures a sustainable revenue stream, which is crucial for offering inflation protection.
The AI tool also pointed out that W.P. Carey carries lower risk due to its operations across various geographies. The platform suggested investors might overlook the stock, especially when inflation concerns are less prominent.
However, despite its potential for steady cash flow, W.P. Carey might not attract all investors due to its low growth profile, particularly when compared to REITs focused on high-growth sectors like technology.
Notably, for the quarter ending June 30, 2024, the company’s revenue declined to $389.7 million, down 13.9% from $452.6 million in Q2 2023.
In the short term, WPC is experiencing positive momentum, with the stock gaining almost 8% over the past month and trading at $60 as of press time. However, year-to-date, the stock is down over 8%.
American Water Works (NYSE: AWK)
According to the OpenAI tool, American Water Works (NYSE: AWK) is considered underrated because it may not be highly appealing to investors, given its focus on a slow and steady growth sector.
However, ChatGPT-4o highlighted AWK as an ideal inflation-proof stock due to its business model centered around water utilities, an essential service. This model allows the company to benefit from consistent demand and minimal competition. The tool also mentioned that AWK’s ability to pass costs onto consumers helps maintain profitability during heightened inflation.
Additionally, ChatGPT-4o acknowledged that some investors might be cautious about utility stocks due to regulatory concerns. However, it noted that AWK’s regulated rate increases can protect profits during inflation. This was reflected in the company’s Q2 2024 revenues, which grew 4.7% year-over-year to $1.15 billion.
By the time of reporting, AWK was trading at $143, reflecting YTD gains of over 7%.
Kroger (NYSE: KR)
ChatGPT-4o’s main argument for Kroger (NYSE: KR) is its strong pricing power and the inelastic demand for groceries. According to the AI tool, Kroger can pass these costs onto consumers as food prices rise with inflation, thereby protecting its margins.
Regarding why the stock might be undervalued, ChatGPT-4o noted that some investors view grocery retail as a low-margin, highly competitive industry.
Moreover, Kroger’s investments in technology and data analytics to enhance supply chain efficiency and customer engagement might be underappreciated compared to tech-centric retailers.
As things stand, KR is trading at $53, having gained nearly 2% in the past week. In 2024, the stock has shown strong performance, rising over 16%.
In summary, as the Fed continues its efforts to control inflation fully, the highlighted stocks, though possibly overlooked by investors, offer options for those seeking a cushion against inflation.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
