It might sound premature to worry about rising prices when inflation and demand for cars, copper and nearly everything else are at their lowest levels in years. Yet a small but growing number of investment pros are betting inflation will return much faster than the conventional wisdom anticipates, and when it does, it will be far more widespread and potent than we’ve seen in years. So they’ve been quietly buying shares of companies – some obvious, some unexpected – that stand to benefit.

Of course, the strategy has some risks. The stock market, in general, could be bumpy for some time. And there’s no guarantee inflation will be back soon, especially if the recession lingers or the economy slips into a depression. The International Monetary Fund, which lends money to countries in distress, says the U.S. faces a moderate risk of deflation, or falling prices. Still, the inflation hawks have history on their side. Since 1945, prices of goods and services have risen, on average, 12 percent within two years after a recession ends. The jump in prices that comes along with an economic recovery is called reflation, and that move often benefits materials, energy and technology firms, says Nicholas Bohnsack, a sector strategist at Strategas Research Partners. Indeed, there are some signs that the U.S. economy’s free fall is over and the beginnings of a revival might not be too far away.

The trillions of dollars governments around the world are pouring into the global economy, whether it’s in the form of stimulus packages, bank rescue deals or other efforts, will make prices go only higher, many analysts contend. A lot of those nations are already running some eye-opening deficits (Japan’s $127 billion, the U.S.’s $1.2 trillion and counting). So they have to print more money without enough assets to back it up, which some believe will devalue their currencies and bring on higher inflation. This is not news to our leaders, of course. But to keep inflation at bay, the Feds probably will have to dramatically raise taxes or drastically curb spending, neither of which seems likely. Bond investors, at least, feel inflation is a worry. In early June, the yield of the U.S. 10-year Treasury bond briefly touched 4 percent, its highest yield since October, because some investors are worried about the amount of debt the U.S. government already has issued and potentially could issue over the next several months.

The advantage of betting on inflation now, says Ron Holt, president of the asset-management firm Hansberger Global Investors, is that many firms’ share prices are still cheap enough to offer a significant margin of safety. Picking inflation winners, however, isn’t so straightforward. Some companies, like big farm-equipment makers, sold hundreds of millions of dollars worth of products during the recent farm boom, so it’s unlikely many farmers will need a quick replacement even if crop prices rise considerably. We focused on five firms that some pros think will get a boost.

SYNGENTA

Even though Mike Mack runs one of world’s biggest agricultural businesses, he readily admits he “doesn’t have a clue” when crop prices will rise again. The CEO of Syngenta, the Swiss seed and pesticide firm, tells SmartMoney he doesn’t really care when they will go back, either. As the world’s population grows, it will need to grow more food, so Mack figures farmers will buy more of Syngenta’s products no matter which way crop prices go.

Some investors, however, do care about crop prices because of their significant effect on Syngenta’s stock. When crop prices rise, farmers are more willing to buy Syngenta’s higher-quality – and more profitable – products that can dramatically increase crop yields. From 2006 to 2008, when corn prices more than tripled, Syngenta’s profits and stock price more than doubled.

Syngenta still isn’t recession proof. Demand for basic grains in China and India has slowed as cash-strapped families have traded down from eating protein like pork, which takes a lot of grain to produce, to rice, which does not. But analysts believe that is likely a short-term phenomenon. The current economic setbacks are baked into the stock price, says Jim O’Leary, portfolio manager of the Touchstone International Growth fund, which owns the stock. He believes the stock could rise significantly over the next two years.

FLUOR

For the Past four years, Irving, Texas-based Fluor was a prime beneficiary of rising oil prices. Fluor builds power plants and other big-ticket construction projects all over the world, but oil- and gas-related projects accounted for half its $22 billion in annual sales. Thanks to the drop in oil prices, that business has tapered off, but as energy prices rise, that profitable business should quickly come back, according to analysts.

In the meantime, the company has other projects to keep its 42,000 employees busy, including one of its biggest-ever projects: helping construct the $2.2 billion Kayan Petrochemical Complex in Saudi Arabia. Fluor also has a hand in building water pipelines and desalination plants in the region, where demand for drinking water is growing at 6 percent a year, according to the Euro-Mediterranean Water Information System, a group that compiles research on water for 35 countries. Also, analysts expect the company to get a big boost if the U.S. adopts new standards to curb pollution. Coal-producing states like Ohio and Indiana would have to invest in so-called carbon-capture plants – one of Fluor’s specialties – if Congress passes carbon cap-and-trade regulations.

Some  investors fear several of Fluor’s $29 billion in backlogged projects could be stretched out or even canceled if the global recession gets worse. But with shares down by more than 40 percent over the past year, that fear is already reflected in the stock’s price, says Pete Sorrentino, portfolio manager of the Huntington Real Strategies fund, which owns the stock.

PETROBRAS

When Brazil’s state-controlled oil company, Petrobras, announced its latest find, a vast offshore oil discovery containing an estimated 8 billion barrels of petroleum, the country’s President Luiz da Silva exclaimed, “God is Brazilian.” It will take several years to fully exploit the new find, but Petrobras’ investors might forgive da Silva for the divine hyperbole. The discovery, combined with its existing oil fields, means Petrobras is sitting on what veteran emerging-markets investor Josephine Jimenez calls a “black gold mine”: 24 years’ worth of proven oil reserves, far exceeding those of other major oil companies. When the global economy improves, analysts expect the demand for oil, along with its price, will increase once again, as it did every year from 1999 until last year.

That expected increase in demand is the reason why Petrobras executives are comfortable telling investors they will spend a whopping $174 billion over the next five years to exploit their oil discoveries (the company spent less than $50 billion from 2002 to 2007). A Petrobras spokesperson says the company’s 2009 expansion plans will be funded using mostly its own cash. The longer-term plan probably involves taking on some debt – not the easiest of tasks in a tight credit market. But at least for now, Petrobras seems set, getting $12 billion from the Brazilian National Development bank and lining up several billion more from other sources.

The company’s profits, at least this year, won’t look fantastic. Analysts expect Petrobras to earn only about half what it made in 2008, when oil averaged $100 a barrel (it’s about $70 now). The company trades at 18 times this year’s expected profits, higher than other oil companies. But that’s not expensive, says Hansberger Global Investors’ Holt, because Petrobras’ recent discoveries suggest the firm could increase profits 8 percent a year for more than a decade, double the rate of the rest of the oil industry.

FREEPORT MCMORAN COPPER & GOLD

Some investors might shy away from a stock after it rises 70 percent in two months, as mining company Freeport McMoRan did earlier this year. But Russell Croft, who co-manages the value stock-oriented Croft Value fund, thinks that rally could be the early stages of a long run for the Phoenix-based miner, one of the world’s largest miners of gold and copper. “If someone opened up a new account, we’d put them in Freeport,” Croft says.

Copper has many industrial uses, including telecommunication wires and buildings, and analysts expect more of the metal to be used in the new infrastructure projects being fueled by government subsidies. Copper prices rose 40 percent in the weeks after President Obama advocated the $787 billion stimulus package. That’s also when Freeport’s stock skyrocketed. But long-term investors are looking past the immediate stimulus and toward a time when economies start recovering and copper demand revives in earnest.

Freeport has shown it knows how to run its business during good and bad times. During flush periods it used much of its profits for dividends and stock buybacks. But last fall, when the economy faltered and copper prices collapsed, Freeport wasted little time slashing its capital-spending budget, suspending its dividend and selling shares to raise cash. Freeport CEO Richard Adkerson said the company will be ready when “credit starts flowing and investing resumes.”

To be sure, a protracted global recession could put a substantial dent in copper demand, which in turn would depress Freeport’s profit potential. But investors such as Jerry Jordan, who runs the Jordan Opportunity fund, are heartened by a pickup in industrial production in China and other signs of a nascent economic rebound, which indicate copper prices, and Freeport’s stock, could go much higher.

APPLIED MATERIALS

The bad news has been coming out of the semiconductor industry for months. Microchip sales have fallen off a cliff. Factories are standing idle. Chipmakers have slashed spending. It all sounds familiar to Josh Spencer. The semiconductor analyst for T. Rowe Price reads the same headlines every five years or so, because the industry, he says, is notorious for “bubbles and busts.” He’s giving the portfolio managers at T. Rowe the same advice now that he did near the end of the last downturn in 2003: Start buying shares of Applied Materials. If investors had listened then, they would have had a 70 percent gain in just 10 months.

Applied Materials is a leading supplier of microchip-manufacturing equipment. The firm admits it’s suffering in the short term. Its sales were about $1 billion in its second quarter of 2009, which ended in April, a 52 percent drop from the same time a year earlier. But Spencer estimates that the industry will, as usual, cut spending and production too deeply. By the middle of next year, he says, chipmakers will be buying equipment in earnest, and Applied Materials can not only sell more equipment but also charge higher prices for its most technologically advanced tools. Since the Santa Clara, Calif.-based company produces a wide variety of the products needed to make microchips, it’s “a sure winner” once demand picks up, says John Buckingham, chief investment officer of Al Frank Asset Management, which owns the stock.

Applied Materials has nearly $1.5 billion in cash on its balance sheet and only $201 million in debt – much less than its rivals. Analysts believe the firm will lose money in its 2009 fiscal year that ends in October but bounce back in 2010 and raising profits 12 percent annually over the next five years.

Copyright 2009 The New York Times Syndicate