2 ASX 200 shares with enough pricing power to battle inflation: Expert

An expert has tipped Transurban and Resmed shares as potential inflation safe havens.

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Rising inflation has been the talk of the town in 2022 and S&P/ASX 200 Index (ASX: XJO) shares aren’t immune from its bite.

In fact, many ASX 200 technology shares have been hit hard by the shifting landscape. The S&P/ASX 200 Information Technology Index (ASX: XIJ), for example, has plunged nearly 38% year to date.

So, which ASX 200 shares can investors trust to grow their hard-earned money in 2022?

Head of Australian equities at T. Rowe Price, Randal Jenneke has flagged two stocks he believes have plenty of pricing power and could act as inflation hedges.

2 ASX 200 shares to buy in times of inflation

There are two likely ways Australia’s current inflationary environment could shift, according to Jenneke.

The first – and most unlikely direction – is towards 1970s-style “stagflation”. The more likely happening? Inflation continuing to rise through 2022. 

“The challenge of rising costs, whether labour or other inputs, will likely persist and contribute to higher headline inflation over the rest of the year,” Jenneke said.

“[W]e will likely see investor focus shift more from top line revenue growth to margin sustainability and their volatility. We have already seen the valuation gap between high margin and high growth narrow.”

And companies with strong pricing power are the most prepared to manage through such a period.

“To pass on costs effectively to buyers requires a good industry structure, differentiated products, and defensive volumes,” Jenneke said.

Resmed CDI (ASX: RMD)

Fortunately, ASX 200 healthcare share Resmed has just that. Jenneke said:

Resmed … has a large under-penetrated market, and despite various input and logistics cost pressures, has been able to pass through price increases given their dominant market share and current lack of reputable competition.

The Resmed share price is currently $30.91, 14.5% lower than it was at the start of 2022.

Transurban Group (ASX: TCL)

ASX 200 infrastructure share Transurban is also set up to battle inflation, according to Jenneke, who said:

Transurban … has built-in price increases for its contracts.

The nature of its cost structure brings high [earnings before interest and tax (EBIT)] margins and margin stability. Anecdotally, you know the cost of tolls are rising when every second taxi driver makes a point or two about it.

The Transurban share price is $14.45 right now, having gained 3.6% year to date.

Finally, the expert noted, “while these are two [shares] we like, we should stress our views are supported by our fundamental insights, rather than the broader economic climate.”

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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