Inflation continues to rise at a pace we haven’t seen in decades and even investment gurus like Warren Buffett I’m hard at work figuring out how to dodge the negative effects.
In December, theUS inflation, measured by the consumer price index, it rose further, at the annual rate of 7%, compared to + 6.8% of November, and al record since February 1982. The trend was in line with expectations.
A flare-up that has repercussions on everyone’s life. Especially for those who are saving, rising inflation means serious consequences for their money.
In such a delicate moment, for those who invest, it can be very useful to follow the instructions of those who know business. Let’s talk about Warren Buffett, the 80+ billionaire, also known as the Oracle of Ohama.
What are the best stocks to own when inflation ignites?
Investment legend Warren Buffett has a lot of advice on what to own when inflation rises.
In a 1981 letter to shareholders, Buffett highlighted two characteristics that help companies thrive amid high inflation: the ability to raise prices easily and the ability to take on more business without spending too much.
Here are the three participations of Berkshire Hathaway, the conglomerate founded by Buffett that best fit Buffett’s thinking.
L’American Express showed its pricing power recently when it raised its Platinum card’s annual fee from $ 550 to $ 695. The company finds itself benefiting directly from a particular inflationary environment such as the one we are experiencing.
American Express makes most of its money through discount fees – traders are charged a percentage on every Amex card transaction. When the price of goods and services rises, the company gets a portion of the larger bills. The business is booming as the company’s revenue jumped 25% year-on-year to $ 10.9 billion in the third quarter.
American Express is the third largest participation of Berkshire Hathaway, only behind Apple and Bank of America. Owning 151.6 million shares in AE, Berkshire’s stake is worth over $ 24 billion. Berkshire also owns shares of competitors American Express, Visa and Mastercard, although the positions are much smaller and American Express shares currently offer a 1% dividend yield.
Coca-Cola is a classic example of a so-called “recession resistant” business. Whether the economy is growing or struggling, a simple can of Coke is still accessible to most people.
The firm’s ingrained market position also gives it some pricing power. Also, Coca-Cola can always count on a trick it has used in the past: keep the same prices but subtly reduce the size of the bottle. Its strengths stem from its portfolio of iconic brands and the fact that its products are sold in more than 200 countries and territories.
After all, the company went public more than 100 years ago and has survived – and thrived – through many times of high inflation. Buffett has held Coca-Cola in his portfolio since the late 1980s and today, Berkshire owns 400 million shares in the company, worth approximately $ 23.1 billion. At current prices, you can get a 2.8% dividend yield on the stock of Coca-Cola.
Who spends $ 1600 on a iPhone 13 Pro Max of design certainly does not speak of theft, since consumers like to spend large sums on Apple products. Earlier this year, the management of the Cupertino giant revealed that the company’s active hardware base exceeded 1.65 billion devices, including more than 1 billion iPhones.
Competitors offer cheaper devices, but many consumers don’t want products outside the Apple ecosystem. This means that when inflation rises, Apple can pass the higher costs on to its global consumer base without worrying about a drop in sales volume.
Today, Apple is Buffett’s largest public holding, accounting for more than 40% of Berkshire’s portfolio by market value.
One of the reasons behind this concentration is the rise in the tech giant’s share price. Over the past five years, Apple stock has risen more than 500% and today, it offers a dividend yield of 1.7%.