Warren Buffett says these are the best stocks to own when inflation spikes — with consumer prices now at a white-hot 8.5%, it’s time to follow his lead
Price levels are on the rise. In July, U.S. consumer prices surged 8.5% from a year ago — down from 9.1% in June but still near a 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.
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 Q2, the company’s revenue jumped 31% year over year to $13.4 billion.
American Express is the fifth-largest holding at Berkshire Hathaway. Owning 151.6 million shares of AXP, Berkshire’s stake is worth nearly $25 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 1.3%.
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.
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…