Warren Buffett says these are the best stocks to own when inflation peaks – with consumer prices still raging, it’s time to follow suit

Warren Buffett says these are the best stocks to own when inflation peaks - with consumer prices still raging, it's time to follow suit

Warren Buffett says these are the best stocks to own when inflation peaks – with consumer prices still raging, it’s time to follow suit

Price levels continue to rise at a pace we haven’t seen in decades. In May, US consumer prices rose 8.6% from a year ago — the largest increase since December 1981.

Rising inflation has serious consequences for your savings.

Fortunately, investing legend Warren Buffett has plenty of advice on what to own when consumer prices rise.

In a 1981 letter to shareholders, Buffett emphasized two business traits investors should look for when fighting inflation: 1) the ability to raise prices easily, and 2) the ability to do more business without incurring excessive spending.

Here are four Berkshire holdings that largely possess those characteristics.

Do not miss it

American Express (AXP)

Last year, American Express demonstrated its pricing power when it increased the annual fee on its Platinum Card from $550 to $695.

The company will also benefit directly in an inflationary environment.

American Express makes most of its money through discounted rates – merchants pay a percentage of every Amex card transaction. As the price of goods and services rises, the company gets higher bills.

Business is booming. In the first quarter, the company’s revenue grew 29% year-over-year to $11.7 billion.

American Express is the fifth largest holding company in Berkshire Hathaway. Berkshire’s stake, which owns 151.6 million shares of AXP, is worth nearly $21 billion.

Berkshire also owns shares of American Express competitors Visa and Mastercard, although holdings are much smaller.

American Express stocks currently offer a 1.5% dividend yield.

Coca Cola (KO)

Coca-Cola is a classic example of a recession-proof company. Whether the economy is booming or struggling, a can of Coke is affordable for most people.

The company’s entrenched market position, sheer scale and portfolio of iconic brands – including names like Sprite, Fresca, Dasani and Smartwater – give it great pricing power.

Add to that solid geographic diversification – the products are sold in more than 200 countries and territories around the world – 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 had Coca-Cola in his portfolio since the late 1980s. Today, Berkshire owns 400 million shares of the company, worth about $25.1 billion.

At current prices, you can lock in a 2.8% dividend yield on the Coca-Cola stock.

Apple (AAPL)

No one spending $1,600 for a fully decked out iPhone 13 Pro Max would call it a steal. But consumers like to buy Apple products anyway.

Earlier last year, management revealed that the company’s active installed hardware has surpassed 1.65 billion devices, including more than 1 billion iPhones.

While competitors offer cheaper devices, many consumers don’t want to live outside the Apple ecosystem. That means if inflation picks up, Apple can pass on higher 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 company, representing nearly 40% of Berkshire’s portfolio by market value. Of course, the huge rise in Apple’s stock price is one of the reasons for that concentration. In the past five years, the tech gorilla’s stock has risen more than 270%.

Apple currently offers a 0.7% dividend yield.

Chevron (CVX)

One of Buffett’s big moves in 2022 is Chevron loading. Berkshire owned $25.9 billion in the energy giant as of March 31, according to an SEC filing — a significant jump from its $4.5 billion stake at the end of 2021.

Today, Chevron represents the fourth largest public holding company in Berkshire.

It’s not hard to understand why. Although the oil industry is capital intensive, it generally does very well during periods of high inflation.

Oil – the most traded commodity in the world – is up 39% so far. And the supply shock caused by the Russian invasion of Ukraine could continue that trend.

Strong oil prices are beneficial to oil producers. Chevron’s latest quarterly results have more than quadrupled year over year. The stock has increased by more than 20% in 2022.

The company also gives money back to investors. Chevron pays quarterly dividends of $1.42 per share and has an annual return of 3.9%.

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This article provides information only and should not be construed as advice. It comes without any kind of warranty.

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