Over the past 12 months, many economists and investment professionals have been warning Americans that a severe dollar collapse was likely, given the U.S. government's view that the economy was in severe dire straights, just as it was in the Great Depression.

"Fed Officials and most politicians also warn that the only way to fix these problems (in their myopic and incorrect view) is to simply print more money and heap more and more layers onto our already spiraling national debt," writes Nicholas Southwick Levis at SeekingAlpha.

In the 1930s, money printing (quantitative easing) helped to relieve the economic stress caused by the stock market crash and the credit collapse that sent many depositors into mass panic and to mile-long lines to withdraw their savings in a bank run, explains Levis.

Today, we have just the opposite problem -- massive inflation and too much debt -- and are trying to cure that problem by adding fuel to the fire -- intentionally creating more inflation.

What is fairly clear is that the Fed will not tolerate the needed deflation, he continues. "Therefore, as investors we must view the game for how it is obviously played -- inflationary forces will persist against the backdrop of a relatively overvalued and overbought stock market until a massive correction is allowed to happen and a real de-leveraging begins."

So how can you protect your portfolio against inflationary forces, if you believe consumer prices are about to spike higher in the aftermath of the Fed's actions? To help you find ideas, we crunched some numbers, and identified a universe of stocks that have outperformed the S&P 500 during the two most recent periods of rising inflation.

These periods of rising inflation occurred between April 2004-July 2005, and January 2007-June 2008, as shown by this chart of the consumer price index:

Firstkapitall

All of the stocks mentioned below have outperformed the S&P 500 during the time periods discussed above, i.e., they tend to outperform the rest of the market when inflation increases.

In addition, all of these stocks have seen significant institutional buying during the current quarter.

We can go back in time, and analyze the entire list's performance during previous dollar rebounds. Here's a graphic representation of this list's performance against the S&P 500 between April 2004-July 2005:

Inflationlist

... and the list's performance against the S&P 500 between January 2007-June 2008:

Inflationlist

To access the data points used to construct these charts, click here. And if you're looking for free, interactive tools to analyze these ideas, click here.

1. Walter Energy (NYSE: WLT): Industrial Metals & Minerals Industry. During the current quarter, institutional investors were net buyers of 6.2M shares, which represents about 11.73% of the company's float of 52.86M shares. Closing price on 4/1/2004 at $12.48 vs. closing price on 7/31/2005 at $44.51 (a price return of 256.65%, outperforming the S&P 500 index by 247.64%). Closing price on 1/3/2007 at $26.58 vs. closing price on 6/30/2008 at $108.77 (a price return of 309.22%, outperforming the S&P 500 index by 318.86%)

2. Gulfport Energy (Nasdaq: GPOR): Independent Oil & Gas Industry. During the current quarter, institutional investors were net buyers of 2.4M shares, which represents about 6.74% of the company's float of 35.63M shares. Closing price on 4/1/2004 at $3 vs. closing price on 7/31/2005 at $7.55 (a price return of 151.67%, outperforming the S&P 500 index by 142.66%). Closing price on 1/3/2007 at $13.18 vs. closing price on 6/30/2008 at $16.47 (a price return of 24.96%, outperforming the S&P 500 index by 34.6%)

3. NetEase.com (Nasdaq: NTES): Internet Software & Services Industry. During the current quarter, institutional investors were net buyers of 3.6M shares, which represents about 5.16% of the company's float of 69.81M shares. Closing price on 4/1/2004 at $50.88 vs. closing price on 7/31/2005 at $58.83 (a price return of 15.63%, outperforming the S&P 500 index by 6.61%). Closing price on 1/3/2007 at $19.55 vs. closing price on 6/30/2008 at $21.79 (a price return of 11.46%, outperforming the S&P 500 index by 21.1%)

4. Key Energy Services (NYSE: KEG): Oil & Gas Drilling & Exploration Industry. During the current quarter, institutional investors were net buyers of 6.4M shares, which represents about 5.14% of the company's float of 124.56M shares. Closing price on 4/1/2004 at $10.85 vs. closing price on 7/31/2005 at $13.1 (a price return of 20.74%, outperforming the S&P 500 index by 11.73%). Closing price on 1/3/2007 at $14.85 vs. closing price on 6/30/2008 at $19.42 (a price return of 30.77%, outperforming the S&P 500 index by 40.42%)

5. Williams Companies (NYSE: WMB): Oil & Gas Pipelines Industry. During the current quarter, institutional investors were net buyers of 27.0M shares, which represents about 4.62% of the company's float of 584.28M shares. Closing price on 4/1/2004 at $10.03 vs. closing price on 7/31/2005 at $21.24 (a price return of 111.76%, outperforming the S&P 500 index by 102.75%). Closing price on 1/3/2007 at $25.69 vs. closing price on 6/30/2008 at $40.31 (a price return of 56.91%, outperforming the S&P 500 index by 66.55%)

6. Abraxas Petroleum (Nasdaq: AXAS): Independent Oil & Gas Industry. During the current quarter, institutional investors were net buyers of 2.6M shares, which represents about 4.26% of the company's float of 61.10M shares. Closing price on 4/1/2004 at $2.57 vs. closing price on 7/31/2005 at $4.59 (a price return of 78.6%, outperforming the S&P 500 index by 69.59%). Closing price on 1/3/2007 at $3.17 vs. closing price on 6/30/2008 at $5.41 (a price return of 70.66%, outperforming the S&P 500 index by 80.31%)

7. Steel Dynamics (Nasdaq: STLD): Steel & Iron Industry. During the current quarter, institutional investors were net buyers of 8.8M shares, which represents about 4.24% of the company's float of 207.79M shares. Closing price on 4/1/2004 at $24.64 vs. closing price on 7/31/2005 at $32.16 (a price return of 30.52%, outperforming the S&P 500 index by 21.51%). Closing price on 1/3/2007 at $31.51 vs. closing price on 6/30/2008 at $39.07 (a price return of 23.99%, outperforming the S&P 500 index by 33.64%)

8. Weatherford International (NYSE: WFT): Oil & Gas Equipment & Services Industry. During the current quarter, institutional investors were net buyers of 30.8M shares, which represents about 4.2% of the company's float of 733.56M shares. Closing price on 4/1/2004 at $40.76 vs. closing price on 7/31/2005 at $63.28 (a price return of 55.25%, outperforming the S&P 500 index by 46.24%). Closing price on 1/3/2007 at $38.67 vs. closing price on 6/30/2008 at $49.59 (a price return of 28.24%, outperforming the S&P 500 index by 37.88%)

9. Massey Energy (NYSE: MEE): Industrial Metals & Minerals Industry. During the current quarter, institutional investors were net buyers of 4.3M shares, which represents about 4.18% of the company's float of 102.85M shares. Closing price on 4/1/2004 at $22.7 vs. closing price on 7/31/2005 at $43.25 (a price return of 90.53%, outperforming the S&P 500 index by 81.52%). Closing price on 1/3/2007 at $22.1 vs. closing price on 6/30/2008 at $93.75 (a price return of 324.21%, outperforming the S&P 500 index by 333.85%)

10. AK Steel Holding (NYSE: AKS): Steel & Iron Industry. During the current quarter, institutional investors were net buyers of 4.1M shares, which represents about 3.77% of the company's float of 108.75M shares. Closing price on 4/1/2004 at $6.03 vs. closing price on 7/31/2005 at $9.22 (a price return of 52.9%, outperforming the S&P 500 index by 43.89%). Closing price on 1/3/2007 at $16.41 vs. closing price on 6/30/2008 at $69 (a price return of 320.48%, outperforming the S&P 500 index by 330.12%)

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.

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