Warren Buffett says these are the best stocks to own when inflation spikes — with consumer prices now at a white-hot 9.1%, it’s time to follow his lead
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.
Spiking inflation has severe consequences for your cash savings.
Fortunately, investing legend Warren Buffett has plenty of advice on what to own when consumer prices spike.
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, and 2) the ability to take on more business without having to spend excessively.
Here are four Berkshire holdings that largely boast those characteristics.
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American Express (AXP)
Last year, American Express 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.
Business is booming. In Q1, the company’s revenue jumped 29% year over year to $11.7 billion.
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.
Berkshire also owns shares of American Express competitors Visa and Mastercard, although the positions are much smaller.
American Express shares currently offer a dividend yield of 1.5%.
Coca-Cola (KO)
Coca-Cola is a classic example of a recession-resistant business. Whether the economy is booming or struggling, a can of Coke is affordable to most people.
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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.
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