Inflation sticks
Inflation that stays above target does not hit every company the same way. When input costs, wages and freight keep rising, the companies that come through with margins intact are the ones that can raise their own prices at least as fast: makers of essential consumer staples and medicines, owners of brands customers will not trade down from, regulated utilities and toll-road style operators whose tariffs pass costs through, and businesses whose contracts are indexed to inflation. Everyone else absorbs the squeeze. A portfolio under this thesis selects US-listed companies with a demonstrated record of holding gross and operating margins through earlier inflationary periods, drawn from staples, healthcare, regulated infrastructure, insurance and software with recurring, repriceable contracts. It excludes businesses locked into fixed-price contracts or facing costs that have historically outrun their prices, such as contract manufacturers, low-margin retailers and labour-intensive services without pricing leverage.
Enterprise Products Partners is an integrated midstream MLP: NGL pipelines, fractionation and export terminals, crude and natural gas pipelines, gathering and processing, and a petrochemical segment (PDH, octane enhancement). its interstate liquids pipelines (Mid-America, Dixie, ATEX, Seminole, TE Products, Seaway) are priced under the FERC indexing methodology, the thesis's direct pass-through channel. but the company's own attribution puts fee-based gross operating margin at 82% · 74% · 77% · 78% · 81% for 2021 → 1H 2025, with the balance commodity-price and differential-based (NGL marketing, equity NGLs, octane enhancement), and much of the fee-based share is contractual gathering, processing, fractionation and terminal fees rather than index-reset tariffs. reported operating margin also fell from about 15.5% (2017–2019) to about 12.8% (2021–2023), though that is a revenue gross-up artefact of commodity marketing while operating income rose.
MPLX is a Marathon Petroleum-sponsored midstream MLP with two segments. Crude Oil and Products Logistics (fy2025 segment adjusted EBITDA $4,547m, about 65% of the $7.0bn total) runs crude and product pipelines, terminals and marine assets under long-term fee-based contracts with minimum volume commitments; 88% of segment revenue comes from MPC and the 10-K states rates escalate annually on the FERC index or other inflation-based indices — the explicit pass-through this portfolio angle targets, and independent commentary records the product tariff rising 23.75% between q3 2022 and q3 2023. Natural Gas and NGL Services ($2,470m, about 35%) is mostly fee-based gathering and processing but includes percent-of-proceeds, keep-whole and NGL marketing arrangements with frac-spread exposure, so its pass-through is less contractual. leverage 3.7x sits under the 5x threshold and operating margin expanded from a 2017–2019 average near 35% to 39–42% in 2021–2022, passing the margin test.
CME Group operates the CME, CBOT, NYMEX and COMEX futures and options exchanges, the BrokerTec and EBS cash venues and a central clearing house. the 10-K states revenue is substantially derived from fees for transactions executed and cleared in its markets; market data and information services were 12% of revenue in 2024 and 2025. the entire business sits in the exchanges leg, so business-share purity is high. the inflation channel is indirect: fees are per contract, not ad valorem, so revenue scales with contract volume and volatility rather than nominal prices; interest rate products are the largest asset class and set volume records in each of the last three years as rate uncertainty persisted. market data is repriced by list (device fee raised $85 → $105 in 2018). operating margin rose 55.5% → 62.0% over 2021–2023 and reached 65.5% in 2025. tier 0.7: pure exchange by mix, but volatility beta and fee discipline rather than contractual indexation.
WM is the largest north american solid waste operator — collection, 257 landfills, 342 transfer stations, recycling and landfill-gas energy. the legacy solid waste business was $21.7bn of $22.1bn 2024 revenue and is the thesis's named direct beneficiary: residential franchises run 3–10 years with index-tied price adjustment (10-K: many contracts tied to CPI), commercial accounts reprice on open-market core price (6% in Q3 2025 vs CPI near 3%), and landfill tipping fees are set on local scarcity. operating EBITDA margin hit a record 30.6% through the 2022–2025 inflation run, leverage 3.3x against the thesis's 5x ceiling. dilution comes from WM Healthcare Solutions (Stericycle, ~17% margin, less contractual), recycled-commodity and RIN exposure, which are price beta not pass-through, and from the lag on index resets. material-to-pure on this angle → 0.8.
Republic Services is the second-largest north american waste hauler: 89% of ~$16bn revenue is recycling and solid waste collection, transfer, landfill and recycling, 11% environmental solutions. the business is the waste leg of this portfolio's angle almost in full — residential and municipal contracts carry annual escalators tied to cpi or the water-sewer-trash index (the company has been converting its legacy cpi book to wst or fixed 3%+ floors), open-market commercial and industrial contracts reprice every one to three years, and fuel recovery fees pass through diesel. the margin record meets the brief: ebit margin ran 18.4–19.0% in 2021–2023 against roughly 17% in 2017–2019, with core price of 7–9% in 2022–2023 exceeding cost inflation. leverage sits well under the 5x threshold. the 11% environmental solutions segment and recycled-commodity price exposure are the only non-contractual pieces, so just short of a pure play.
Waste Connections is an integrated solid waste collector and landfill operator in secondary and exclusive north american markets. q2 2026 reported revenue was 69.6% solid waste collection, 18.1% disposal and transfer, 2.4% recycling, 7.9% E&P (oilfield) waste and 2.0% intermodal — about 90% is the solid waste franchise, which is the waste leg of the pass-through angle. pricing is a mix of contractual CPI escalators on franchise and municipal contracts and open-market increases in competitive markets; core price ran 5.6–6% in 2026 against lower cost inflation. margin test passes: GAAP operating margin averaged about 15.3% in 2017–2019 and about 16.5% in 2021–2023, and adjusted EBITDA margin reached 34% in q3 2026. leverage about 2.75x debt to adjusted EBITDA, well under the 5x threshold. not a full 1.0 because roughly 10% of revenue is commodity-linked (E&P waste, recycled commodities, RNG) and only the exclusive-market share is explicitly indexed.
Atmos Energy is a fully regulated natural gas utility — distribution in eight states plus an intrastate Texas pipeline — with no unregulated or commodity segment, so the whole business sits inside this portfolio's angle. cost pass-through is explicit: purchased gas cost adjustment mechanisms in every jurisdiction give a dollar-for-dollar offset so distribution operating income does not move with gas prices, and annual formula rate and infrastructure mechanisms let it begin recovering about 95% of capex within six months and substantially all within twelve. Moody's independently credits timely cost recovery mechanisms. operating income rose each year FY2023 → FY2025 across both segments. the brief rates utilities as material rather than direct because of 6–18 month regulatory lag; Atmos sits at the short end of that lag with roughly 60% equity capitalisation, so the tier is above material but short of a pipeline or waste pure play → 0.8.
Union Pacific is a single-segment class I railroad — about 30,000 route miles in the western two-thirds of the US, $24.5bn of 2025 revenue from bulk, industrial and premium freight. the whole business is tolled infrastructure: freight rates are set by UNP under a duopoly network, fuel costs are recovered through surcharge programs and management guides to pricing dollars above inflation each year. the margin record passes the house test — operating ratio averaged about 62.1% in 2017–2019 and about 59.9% in 2021–2023 (57.2 · 60.1 · 62.3), so operating margin expanded roughly 200bp through the inflation window even though 2023 gave some back to labour and fuel lag. leverage is moderate (debt $31.8bn against ~$9.8bn operating income).
Arthur J. Gallagher is an insurance broker (SIC 6411). the brokerage segment — retail p&c, wholesale, reinsurance, benefits — was about 89% of revenue in q1 2025, with the remaining 11% a fee-based third-party claims administration business. brokerage revenue is commissions set as a percentage of premiums, so nominal revenue scales with premium rates, which in turn track loss-cost inflation; there is no underwriting risk. fiduciary and interest income on client balances also rises with rates. the margin record passes the thesis test: brokerage adjusted EBITDAC margin was 34.3% in 2023 versus roughly 30% in 2019. against this portfolio's insurance-broker angle the company is the thesis almost in its entirety; the small claims-admin segment is fee-per-claim rather than ad valorem, which keeps it just short of a full pure play → 0.9.
Progressive is a monoline short-tail P&C underwriter: personal lines were 87% of 2025 net premiums written, of which 96% is personal vehicle (auto plus special lines), commercial auto is roughly a tenth, and homeowners about 4%. no life, no long-tail casualty of scale, no non-insurance segment; the balance of earnings is investment income on a bond-heavy float. personal auto on six-month policies is the fastest-repricing book in the sector, so the whole business expresses the angle — annual-or-faster rate above loss-cost trend plus float yield. the deduction from 1.0 is the margin record: combined ratio averaged 91.6 in 2017–2019 and roughly 95 in 2021–2023 as claims severity outran rate filings, a lag of about two years before the 2024–2026 recovery to 87–89. by business share it is a pure play; the demonstrated repricing lag is what keeps it a touch below the top tier.
Brown & Brown is an insurance agency and wholesale broker: fy2025 commissions and fees of $5,763m were effectively all of revenue, split Retail 58.7% and Specialty Distribution (wholesale brokerage and Arrowhead programs) 41.3%. the 10-K states commissions are a percentage of premiums paid by insureds, so nominal revenue tracks premium levels, which rise with insured values and loss-cost inflation — the exact broker leg of the thesis, with no underwriting risk beyond small captives. the margin test passes: income-before-tax margin 22.0% in 2019 → 25.0–26.9% in 2021–2023, adjusted EBITDAC margin 30.0% → 32.8–33.9%. not a full 1.0 because roughly a fifth of commissions and fees are fee-based rather than ad valorem, and the programs and dealer-services (F&I) businesses are adjacent to pure brokerage. an insurance-broker pure play → 0.9.
Arch Capital is a Bermuda specialty insurer and reinsurer with three segments. fy2025 gross premiums written were $22.9bn — reinsurance 48%, insurance 46%, mortgage insurance 6% — so about 94% of premium is p&c insurance and reinsurance, the angle's business. the book is not cleanly short-tail, though: insurance npw is 31% property and short-tail specialty against 27% other liability and 10% commercial multi-peril, reinsurance npw is 27% property, 20% casualty, 33% specialty, and in q4 2025 management grew long-tail liability and commercial auto while property and short-tail specialty shrank. mortgage insurance is a credit-risk book priced at origination, not an annually repriced one, and contributes a disproportionate share of underwriting income. invested assets of $47.4bn give float-yield leverage to elevated rates. p&c repricing plus float yield is most of earnings, but the casualty mix and mortgage leg keep it at material exposure rather than pure play → 0.6.
MSCI is a financial data and index vendor with no other business: index (57% of fy2025 revenue, 70% of operating profit per Morningstar), analytics, sustainability and private assets. revenue is almost entirely recurring annual subscriptions plus asset-based fees (43% of index revenue) that scale with nominal AUM in linked ETFs and funds. subscriptions reprice at annual renewal with retention above 93% and the margin record is the strongest in the data-vendor cohort — operating margin 45.5–48.5% in 2017–2019 rising to 54.8% in 2023 and 56.4% in q4 2025, so it clears the 150bp test with room. against this portfolio's financial-data angle the whole company expresses the thesis, but the uplift is a commercial practice rather than a disclosed CPI escalator and roughly a fifth of revenue rides equity market levels, not price — hence 0.8 rather than 1.0.