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Pro: these companies with growing gross profit look attractive

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Companies with pricing power are a great pick for the current inflationary environment, and the way to identify such companies is to look for gross profit growth, says Degus Wright.

Wright picks companies with growing gross profit

A name that fits the description, as per the founder of Decatur Capital Management, is CVS Health Corp (NYSE: CVS), down 10% from its high in early February. On CNBC’s “Worldwide Exchange”, he said:

CVS Health had a gross profit in 2016 of about 17%. Today, their gross profit is 40%. And that’s due to their acquisition of Aetna, the digital platform that’s doing really well, and the growth in pharmacy.

In February, CVS offered hawkish guidance for the full year. The pharmacy giant is expected to report its Q1 results next week.

Degus Wright also likes this semiconductor company

Another name that pops out to him as attractive in terms of gross profit growth is the Dallas-based semiconductor manufacturing company, Texas Instruments Inc (NASDAQ: TXN), down 10% in about a month. Wright noted:

Texas Instruments’ gross profit was 61% in 2016. Today, it’s 67%. What’s happening in TXN is that there’s a strong growth in demand for chips by automakers and also increase in the IoT demand for chips.

He’s also bullish on Tesla Inc that reported market-beating results for its fiscal first quarter last week.

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