3 ASX 200 value shares to buy for higher inflation: fundie

One fund manager provides three ways to potentially benefit from rising rates…

| More on:
a woman sits in comtemplation with superimposed images of piles of gold coins, graphs and star-like lights above her head as though she is thinking about investment options.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There are few things as pervasive and potentially destructive to real returns than inflation. The fear of watching rising costs consume investors’ portfolios has many people seeking out the best corners of the S&P/ASX 200 Index (ASX: XJO) to fend off the devaluing phenomenon.

For this reason, the market has tended to steer away from the traditionally dubbed ‘growth shares‘. Taking their place in popularity are the companies with proven profits at reasonable prices — otherwise known as ‘value shares‘.

Although, which ASX 200 value shares might not only handle higher inflation but actually benefit from it? Offering potential answers to this question, Lazard Asset Management portfolio manager Aaron Binsted rattled off a few names with Livewire recently.

Let’s take a look at what the fund manager had to say.

Inflation beneficiaries in the ASX 200

According to Binsted, value shares are set to outperform amid a turn away from the speculative side of the market. Behind this confident projection are a number of key factors firming the fund manager’s view. These include rising inflation, earlier rate increases, and extreme volatility.

In the interview, Binsted highlighted three ASX 200 companies that he expects will ride the wave of inflation.

Firstly, the portfolio manager labelled the energy and insurance sectors as breadwinners during the transitioning environment. Of these, Woodside Petroleum Ltd (ASX: WPL) was Binsted’s top pick among energy shares.

With oil prices at seven-year highs, nearing US$100 per barrel, beefed cash flows and margins are enticing to the fund manager. Binsted said:

We know that gas demand is going to have structural growth in Asia for at least the next 20 years. So, it’s a really nice combination of really high returning cash flow, short payback in oil and longer-term steady cash flow on the LNG side

Meanwhile, on the insurance front, QBE Insurance Ltd (ASX: QBE) takes the crown as the pick of the bunch. Binsted expects QBE to gain around 5% to 6% on its earnings per share (EPS) for every 0.25% increase in interest rates. If this turns out to be true, the insurance provider could be staring at bigger profits in the future.

The final ASX 200 share that might be a winner under inflationary circumstances is Computershare Limited (ASX: CPU). According to the experienced investor, EPS could lift 10% for each 0.25% rate rise. The stock registry services provider won over the market with a solid half-year result in early February.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Value Investing

A girl is handed an oversized ice cream cone with lots of different flavours.

Looking for value: The ASX shares this fundie is holding amid rising inflation

Here are some investments that could be well suited to the current climate.

Read more »

Value spelt out with a magnifying glass.
Value Investing

Woodside shares or Whitehaven? What’s the best ASX 200 value play?

Woodside is producing oil at a cost of roughly 10% of the current global spot price.

Read more »

Rich man posing with money bags, gold ingots and dollar bills and sitting on table
Value Investing

3 ASX 200 shares swimming in billions, besides banks and miners

These three companies are loaded with cash...

Read more »

A group of five people dressed in black business suits scrabble in a flurry of banknotes that are whirling around them, some in the air, others on the ground as some of them bend to pick up the money.
Value Investing

Free cash flow: Here are 3 ASX All Ords shares that have it in spades

The lifeblood of a company is back in focus...

Read more »

two young boys dressed in business suits and wearing spectacles look at each other in rapture with wide open mouths and holding large fans of banknotes with other banknotes, coins and a piggybank on the table in front of them and a bag of cash at the side.
Value Investing

3 ASX shares that could cash in on higher interest rates

Money in the bank is looking even more appealing for these ASX shares...

Read more »

A business man in soft-focus holds two fingers in the air in the foreground of the shot as he stands smiling in the background against a clear sky.
Value Investing

Gambling & explosives: fund reveals 2 ASX shares to buy right now

Inflation and interest rate rises mean businesses that make positive earnings now are now more valued than those with future…

Read more »

A young woman sits on her lounge looking pleasantly surprised at what she's seeing on her laptop screen as she reads about the South32 share price
Value Investing

While everyone was focused on growth shares, these ASX value shares have been quietly but significantly gaining over the last 10 years

Looking for value shares?

Read more »

Deterra share price royalties top asx shares represented by investor kissing piggy bank
Value Investing

These are some of the top performing ASX 200 value shares of the past year

What value is in a value share?

Read more »