Companies that can thrive during inflationary times are usually the ones that can demonstrate pricing power. That way, when input costs rise, they can increase prices on their products without losing customers. In this segment from "The Five" recorded Dec. 14, Fool contributors Trevor Jennewine and Connor Allen discuss inflation and highlight a few stocks that can benefit.
Trevor Jennewine: Building on that, the first part of the question with the consumer price index so high and the Producer Price Index also rising pretty quickly. Let's each talk about a company that we think could benefit in the environment. Connor, let's go with you.
Connor Allen: I'm going to go with two and it's the ones that I mentioned in the last question and those are Garmin (NYSE: GRMN) and Apple (AAPL +1.18%) . Everybody knows Apple really strong, free cash flow, really strong return on invested capital but Garmin is another one that I really like. Garmin has pretty solid market share in a couple of different industries. Those include marine, those include wearables, aviation, and outdoors. In all of those specific industries, Garmin has some of the highest prices compared to its competition when you're talking about wearables and Garmin watches that they have. Those are all very pricing when you're talking about marine and all the electronics that they have for fishing, very pricey compared to competitors and especially when you're talking about aviation. Aviation, they actually have a lot of long contracts with some large businesses and the government in terms of jets and other farming planes and stuff like that.
They actually have almost double the price and aviation for the electronics that pilots need almost double the price of a lot of their competitors but people continue to buy Garmin and that's for a variety of reasons, including the fact that the equipment that they're using is certified and some of their competitors are not, which allows you to use them when you're facing turbulence and other stuff that pilots typically face. Garmin also has pretty strong margins.
They've had 25-30 percent EBITDA margins for the past five years balances around a little bit. They actually have loaded up on inventory in the united states in order to combat the supply chain problems that are driving inflation so I guess they got out in front of this a little bit and they've built up their inventory currently. It's Apple. I don't think I need to explain much more besides just saying their name, but they continue just to raise expectations of investors this past quarter. They had very high expectations and they beat them. It's something that they continue to do over and over again, no matter how high those expectations might become something that I love about the company. This year they are bringing in over a billion dollars a day in revenue, which is just crazy. It's crazy to even think about that number and they have been for the past five years, they've had 25-35 percent EBITDA margins.
I'd like saying high-margins, especially in a time like this when costs are getting higher.
