You CAN cash in on inflation: Why top fund Blue Whale is backing firms that can increase their prices – and how to find UK shares that can profit too

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  • Inflation may prove to be the biggest winter story for investors
  • The latest data – often from the US – is raising fresh fears of rising costs
  • Markets nervous due to investor concerns, central banks may have to increase rates
  • Major indices may fall as much as 2% – before a gradual recovery

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Investors could be forgiven for thinking the market was bogged down in Groundhog Day. For the past few months, the same story is coming to the fore again and again.

First, we see that the release of data – often from the US – triggers new fears of rising costs. This then scares the markets, as investors worry that central banks may raise interest rates too soon.


Major stock indices typically fall sharply — sometimes up to 2 percent — before slowly recovering their losses.

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Spiral: The latest inflation data – often from the US – is triggering fresh fears of rising costs, scaring the market as investors worry central banks may have to raise rates

Inflation will prove to be the biggest story of winter for investors. But does this put pressure on your portfolio?

One of Britain’s best-known fund managers has revealed that he expects to profit from inflation.

Stephen Yiu is the manager of Blue Whale Growth Fund: a £1 billion strong equity fund known for its bets on technology giants. The fund has performed extremely well over the past five years, turning a £10,000 investment into £18,500.

Mr Yiu is predicting that rising inflation will force central banks – in the US and UK – to tighten policy. In response, the fund is betting on firms that can raise their prices to offset rising costs.

Its largest holding is Microsoft, which makes up about 8 pc of the fund. The firm is set to increase the price of some of its most popular packages by up to 25 percent – including Office365.

But Mr. Yiu predicts that Microsoft’s market dominance means customers will have little choice but to pay the difference.

His fund seeks to support companies with lower external costs than income.

The logic is simple: The less money businesses spend on supplies, the less they will be affected by rising costs. That’s why the fund supports Facebook — or Meta as it’s now known — as well as Visa and MasterCard.

Essentials: Consumer goods titan Unilever has traditionally been rated as the biggest inflation shield on the FTSE 100, due to its power to pass on costs to consumers.

Essentials: Consumer goods titan Unilever has traditionally been rated as the biggest inflation shield of the FTSE 100, due to its power to pass on costs to consumers.

There are options closer to home for those looking to cash in on inflation.

“You need to ask how rising input costs – including raw materials and labor – will affect a business,” says Rob Morgan from investment platform Charles Stanley.

‘Companies whose products and services are in strong demand should do well, as they can raise their prices to reflect costs.’

Consumer goods titan Unilever has traditionally been touted as the FTSE 100’s biggest inflation shield because of its power to pass costs on to consumers.

Yet the Anglo-Dutch company hasn’t had an easy ride with the pandemic disruption. Its share price is currently down 13.62 per cent since January, and is down 16.9 per cent from its pre-Covid price.

But the FTSE also has other options that conform to the golden rule: namely companies with a strong client base and low capital expenditures.

Accounting software firm SEZ is one option. As a technology company, it has low capital costs and, like Microsoft, it can pass up prices for its customers. Its share price is up 34.57 per cent since January.

With its bargaining power over suppliers, Tesco can mitigate the effects of inflation. Its price has been rising steadily lately – 23.96 per cent in six months – but remains down (13.91 per cent) at its pre-Covid high.

If you restructure your portfolio, you should keep investing fundamentals in mind. Most importantly, don’t get distracted by short-term noise and invest only in firms that you think can perform in the long run.

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