3 Stocks To Avoid With Rising Food, Energy, And Labor Costs

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Most analysts expect the second half of the year to be quite strong as the economy gradually returns to normal. The biggest beneficiary will be the travel and tourism sector which has been offline for much of the past 15 months. Companies in these sectors will certainly benefit from pent-up demand over the next few quarters, which should lead to higher revenues and more pricing power.

However, these companies do face a notable challenge. In order to meet this demand, they will need to aggressively hire workers, which is proving to be difficult for many businesses especially without meaningfully raising wages. Many workers left the industry to pursue work in other sectors which were hiring over the last year. Many older workers seem to have permanently left the workforce. 

Most likely, these companies will have to significantly raise wages and offer additional benefits to attract workers. This will inevitably eat into margins. I don’t expect this to matter in the near-term given the surge in demand, but I do think it will lead to lower multiples on a longer-term basis.

Of course, the same circumstances are playing out with other costs, such as food and energy. Therefore, investors should be wary of the following stocks: Shake Shack (SHAK), Carnival Cruises (CCL), and Hyatt Hotels (H).

Shake Shack (SHAK)

Shake Shack is one of the most popular and fastest-growing restaurant brands in the country. The company was founded by famous restaurateur Danny Meyer with a single location in NYC. Its simple menu of burgers and milkshakes resulted in a cult following that led to long lines. Today, the company has over 300 locations with aggressive expansion plans.

Therefore, it’s clear that Shake Shack is going to have to hire aggressively to meet this demand. Further, the company is known for already offering its workers above-average wages and better benefits than most eating establishments.

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James Grover 1 month ago Member's comment

lol! So you’re saying avoid every stock that has food involved? 😂😂😂😂 it’s transitory