This stock is our favorite way to hedge against the pickup in inflation
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. The S & P 500 overcame a softer open and rallied to new record highs on Wednesday despite another hotter-than-expected inflation report that nudged long-dated U.S. Treasury yields higher and renewed concerns about future monetary policy decisions. The producer price index (PPI) rose a seasonally adjusted 1.4% in April, lifting the annual rate to 6% — its highest level since 2022. The benchmark 10-year Treasury yield hovered near 4.48% in afternoon trading following the release. The renewed inflation fears prompted investors to rotate out of consumer stocks that could feel pressure from weaker spending power and back into AI-related names. Semiconductor and data center-related names rebounded after Tuesday’s dip, helping offset weakness in more rate-sensitive areas of the market. Shares of Club holding Nvidia rose roughly 3% to an all-time high. Fellow Club names Eaton and Corning gained about 1.5% and 2.5%, respectively, recovering some of the prior session’s losses. As the market grapples with what comes next after back-to-back hot CPI and PPI reports, one portfolio stock to consider as a hedge against inflation is the industrial gas giant Linde . Linde distributes gases like oxygen, nitrogen and hydrogen a few different ways. One is “on-site” agreements, where Linde builds plants on or nearby its customers’ facilities and delivers the gases via pipeline. In those supply agreements, Linde recovers higher energy and feedstock costs by passing them through to the customer. The higher energy costs won’t eat into profits. Another big one is “merchant” agreements, where Linde delivers gases from its plants to storage containers at customer sites. The third method is packaged gases, which is when Linde distributes smaller volumes in metal containers. In these two distribution methods, Linde can manage energy volatility by putting on and taking off surcharges. If inflation becomes more ingrained, those surcharges eventually turn into higher prices for them. Linde’s status an inflation hedge is one of several reasons why we’ve kept this stock in the portfolio for many years. More recently, we’ve been focused on its electronics and space exposure as end markets that could help reaccelerate volume growth. Volume growth plus pricing gains is the ideal one-two punch. Looking ahead, Cisco Systems reports after the bell. We were wrong to exit our Cisco position at the end of March over concerns about rising memory prices hurting gross margins, though we still locked in a solid gain. We’re interested in hearing what management has to say about AI networking demand. Klarna reports before the opening bell on Thursday. Weekly jobless claims and April retail sales are on the economic agenda Thursday. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
