Here’s How Warren Buffett Invests with High Inflation

Feb 22, 2023

Inflation still isn’t under control.

CPI jumped 6.4% in January year over year, which was above expectations for 6.2.%.  Core CPI – which excludes energy and food prices -was up 5.6% year over year, as compared to forecasts for 5.5%. Worse, PPI jumped 0.7% in January – which was more than expected. Analysts were only looking for an increase of 0.4%.  Then, once you exclude food and energy, the core PPI number came out to 0.5%, as compared to expectations for 0.3%.

But don’t let that chase you from the markets.

Instead, take some advice from Warren Buffett, who, in a 1981 shareholder letter “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,” as noted by Moneywise.

Some of the top stocks with those very characteristics include: 

American Express (AXP)

AXP benefits well 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,” added Moneywise.

Coca-Cola (KO)

KO is one of Warren Buffett’s favorite dividend-paying stocks. With strong demand, dependable dividends, and incredible earnings growth, Coca-Cola may be one of the best stocks to consider, long-term.  Buffett, who drinks about five cans of Coke a day, agrees, once calling KO a “forever” stock.  Coca-Cola is also a dividend king, raising its dividend for the last 60+ years.  

KO has a current yield of 3.06%.

Apple (AAPL)

With a diversified revenue stream, and an ability to adapt to new consumer trends, Apple will always be a strong part of the Berkshire portfolio.  In fact, Warren Buffett once told CNBC that he continues to invest in Apple because of its brand, ecosystem, and strong economic moat.  He also views Apple’s iPhone as a “must have” device for a large part of the global population.

In addition, we have to consider that Apple is a global leader in innovation.  Just look at the iPhone alone.  First introduced to the public in 2007, it’s now one of the most popular mobile phones in the world, with growing market share.  

For Buffett, who seeks out strong companies with moat and powerful brand recognition, no wonder he loves Apple so much.

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