When inflation rises, not all companies are affected equally. Some businesses get squeezed by rising costs and shrinking margins, while others manage to thrive. According to Registered Financial Planner Josefino Gomez, smart investors can protect their money by looking for companies built to withstand inflation.
“Search for businesses that can raise prices without reducing demand,” Gomez told Financial Adviser PH. “Firms with market and pricing power can increase their selling prices to mitigate the impact of inflation.”
Pricing power is one of the key traits that makes a company more resilient during inflationary periods. These are businesses whose products or services are considered essential, unique, or brand-driven—giving them the ability to pass on higher costs to consumers without hurting sales.
Gomez also suggests looking at capital requirements. “Invest in good companies with low capital needs,” he said. “In inflationary times, businesses that can maintain earnings without purchasing new and more expensive capital equipment will be at an advantage versus those that are capital intensive.”
This means companies that rely heavily on physical infrastructure—like manufacturing or utilities—may suffer more from rising material and equipment costs. Meanwhile, businesses focused on intangible assets, like software, digital platforms, or intellectual property, often scale more efficiently with lower overhead.
Some red flags to watch out for? Companies with thin profit margins, high debt levels, or a reliance on commodities they don’t control may struggle during inflation.
The goal is to find businesses that are lean, flexible, and have a strong competitive edge. These are often found in sectors like technology, healthcare, or consumer staples—industries where demand tends to remain steady, even as prices fluctuate.
“Many companies can only partially pass on their increased cost,” Gomez added. “The companies who can increase prices without reducing demand should do better in inflationary times.”
For long-term investors, spotting inflation-proof companies isn’t about chasing trends—it’s about understanding which business models have the strength and flexibility to grow even when the economy heats up.
