Consumer, housing stocks touted as inflation hedges

Top defensive plays in the PSE include banking and conglomerate stocks

From consumer stocks to housing plays, the equities market still offers attractive returns especially for investors seeking a hedge against rising inflation, BDO Securities Inc. said on Thursday.

The stockbrokerage house of Sy-led banking giant BDO Unibank unveiled a series of stock picks that would benefit from “enduring demand” and healthy profit margins.

Abigail Chiw, BDO Securities head of research, said picks include consumer, property, banking and top conglomerates, including the Sy family’s SM Investments Corp.

The picks were Puregold Price Club Inc., Robinsons Retail Holdings and D&L Industries. Banking plays were Bank of the Philippine Islands, Metropolitan Bank & Trust Co. and Security Bank while picks among holding firms included Alliance Global Group and GT Capital Holdings. Finally, it selected Ayala Land Inc., Megaworld Corp. and Robinsons Land Corp. for the property sector.

“Investors can explore stocks that offer products and services with enduring demand and cost pass-through structure as these are better positioned to manage inflation headwinds,” said Chiw.

Cost pass-through refers to the ability of companies to maintain margins and demand despite price increases.

BDO Securities said the Philippines remains “vulnerable to inflation risks given its status as a food and energy importer.”

It also expects domestic food inflation factors to drive price increases, moving forward. So far, the benchmark Philippine Stock Exchange Index has declined about 7 percent this year after recovering from previous losses.

“Given the uncertain macroeconomic backdrop, we suggest investors to consider quality names in consumer, banks, property and conglomerates, or sectors which we expect to still benefit from positive reopening dynamics and offer healthy earnings growth at reasonable valuations,” Chiw said.

“Several of these names are also trading at deep discounts—that is, below book value—and are good value recovery plays, in our view,” she added.