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Goldman says companies that can pass on price increases will thrive as inflation picks up

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Traders work on the floor of the New York Stock Exchange.

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Inflation has become a pressing threat for equity investors enjoying the market’s record run this year.

For those expecting a rise in price pressures to lead to many casualties in the stock market, Goldman Sachs identified a slew of names immune to the potential inflationary force.

Expectations have been rising for inflation to perk up amid the historic economic reopening as well as trillions of dollars in fiscal stimulus. Higher inflation expectations have been pushing bond yields up at a rapid pace in recent months, raising concerns about equity valuations.

This week’s consumer price index report will be front and center as the March data is likely to show a pickup. Economists polled by Dow Jones anticipated a 0.5% gain month over month and a 2.5% increase from last year’s level.

Goldman believes that in an inflationary environment, companies with high pricing power will outperform because they have the ability to defend their margins by passing the higher costs to their end market customers.

“How do publicly-traded stocks fit into the inflation picture? It is all about margins,” Goldman chief U.S. equity strategist David Kostin said in a note. “Based on our recent conversations with managements, firms are experiencing higher input costs stemming from supply chain disruptions, rising commodity prices, and increased labor costs.”

The bank screened the Russell 1000 for high pricing power stocks based on the level and variability of each stock’s gross profit margins relative to sector peers. These companies are all expected to generate top and stable sales growth this year despite higher price pressures.

Here’s the list:

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