Inflation isn't hitting all companies equally. In fact, some companies have so much pricing power that they can raise or maintain high prices without consumers leaving. In this segment of Backstage Pass, recorded on Nov. 1, Fool contributors Rachel Warren and Connor Allen discuss one such stock.
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Rachel Warren: We are going to move onto our second topic of the day. I saw the story by the New York Times, and I thought it was just too good to pass up. It's no secret that Apple's products generate high and very consistent demand, and I think that this is one of the reasons that the stock has flourished in such a wide variety of market environments. According to this article by the New York Times, Apple's most back ordered product is this polishing cloth, and this polishing cloth, which can be used to treat any kind of Apple display, retails for a cool $19 a piece. I think for one, this speaks to the incredibly loyal customer base that Apple has.
In the current market environment, companies that are market leaders with strong pricing power like Apple, I think it also shows this is a company that's very much prime to withstand the inflationary environment that businesses are operating in. Here's my question. If you think about a company like Apple, it's most back-ordered product is a polishing cloth that you're going to dish out almost $20 just for this little cloth.
Is there a stock that you can think of that has a really strong brand loyalty that you believe gives it robust pricing power to ride out the current inflationary periods and supply chain crisis? Conner, why don't you take this one first.
Connor Allen: Yeah, for me, and this goes along with Apple selling the polishing cloth is, if you think about young kids that are buying little tiny tractors like hot wheels bicycle, what are they always? They are always John Deere, and that's a similar thing to what Apple is doing. John Deere (DE -0.07%) has a ton of brand loyalty. They also have a ton of brand awareness.
When anybody thinks of big green tractor that's sung about in all the country songs, when everyone thinks about farming, they think of John Deere. Just today actually they reached an agreement with their workers, gave them 10% raises. There was a big strike deal with a labor union upon in Iowa, and that had been going on for the past few weeks, and there were some concerns about that, the stock is up on those news, that the agreement has been made.
I think it goes to say that their pricing power comes from their branding. I think that's true with a lot of different companies. It's largely due to the technology that they have and the branding that they have, and the fact that they've been around for over a century.
If you have a company that's been around that long, obviously, they probably have been doing some things well. I talk about John Deere a lot and that's because I really do believe in what they're doing. I think it's a great company and I think it's going to pay off for their investors.
