Warren Buffett's best inflation-proof stocks
Investing legend Warren Buffett has plenty of advice on what to own when consumer prices spike.
Price levels continue to rise at a rate we haven’t seen in decades. In June, U.S. consumer prices surged 9.1% from a year ago — a new multi-decade high.
In a 1981 letter to shareholders, Buffett highlighted two business traits that investors should look for when trying to fight inflation:
1) The power to increase prices easily.
2) The ability to take on more business without having to spend excessively.
Here are four Berkshire holdings that largely exhibit those characteristics.
American Express (AXP)
Last year, $American Express (AXP.US)$ demonstrated its pricing power as it raised the annual fee on its Platinum Card from $550 to $695. The company also stands to directly benefit in an inflationary environment.
American Express makes most of its money through discount fees — merchants are charged a percentage of every Amex card transaction. As the price of goods and services increases, the company gets to take a cut of larger bills.
American Express is the fifth-largest holding at Berkshire Hathaway. Owning 151.6 million shares of AXP, Berkshire’s stake is worth nearly $21 billion.
Coca-Cola (KO)
The company’s entrenched market position, massive scale, and portfolio of iconic brands — including names like Sprite, Fresca, Dasani and Smartwater — give it plenty of pricing power.
Add solid geographic diversification — its products are sold in more than 200 countries and territories around the globe — and it’s clear that Coca-Cola can thrive through thick and thin. After all, the company went public more than 100 years ago.
Buffett has held $Coca-Cola (KO.US)$ in his portfolio since the late’80s. Today, Berkshire owns 400 million shares of the company, worth approximately $25.1 billion.
Apple (AAPL)
Consumers love splurging on $Apple (AAPL.US)$ products. Earlier last year, management revealed that the company's active installed base of hardware has surpassed 1.65 billion devices, including over 1 billion iPhones.
While competitors may offer cheaper devices, many consumers don’t want to live outside the Apple ecosystem. That means, as inflation spikes, Apple can pass higher a long costs to its global consumer base without worrying too much about a drop in sales volume.
Today, Apple is Buffett’s largest publicly traded holding, representing nearly 40% of Berkshire’s portfolio by market value.
Chevron (CVX)
One of Buffett’s big moves in 2022 was loading up on $Chevron (CVX.US)$. Berkshire owned $25.9 billion of the energy giant as of Mar. 31 — a significant jump from its stake of $4.5 billion at the end of 2021, according to an SEC filing.
Today, Chevron represents the fourth-largest public holding at Berkshire.The oil business tends to do very well during periods of high inflation.
Oil has soared 33% year to date, the supply shock caused by Russia’s invasion of Ukraine could keep that trend going. Strong oil prices benefit oil producers. Chevron’s latest quarterly earnings more than quadrupled year-over-year. The stock is up more than 15% in 2022.
Source: MoneyWise
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71750344 : I wonder how much Buffett has lost since Biden became president?
JC727 71750344 : honestly, I doubt anything. he knows how to invest based on the market and economy.
charming Wolverine_4 71750344 : he lost his brain
charming Wolverine_4 71750344 : democratics completely lost their brains since fake president became cheater
RDK79 JC727 : Only a loss if you sell. Guessing WB has kept a good reserve and hasn’t had to sell much this year.