1 Key Factor Allows These 2 Companies to Thrive in Periods of High Inflation
When inflation hits, it tends to have (often negative) effects on everybody, from consumers to corporations. The higher cost of products and production tends to lower profits and make it harder to keep growing. A mark of a great business is its ability to pass along those inflationary costs to its customers without losing sales. Also referred to as "pricing power," it's a characteristic of great companies and famed investor Warren Buffett says it's the "single-most important [variable] in evaluating a business."
Software companies tend to develop products with pricing power. While some software programs are nice to have, others are vital for day-to-day operations. For engineers and architects, computer-aided design (CAD) and simulation software are irreplaceable and used daily. Two leading companies in this space are Autodesk (NASDAQ: ADSK) and Ansys (NASDAQ: ANSS). While neither is likely to produce explosive growth, these companies provide consistent returns both in good years and bad and can turn their pricing power into strong stock returns.
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Source Fool.com
