Price levels are on the rise. In October, U.S. consumer prices surged 7.7% from a year ago — down from 9.1% in June but still worryingly 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 Q3, the company’s revenue jumped 24% year over year to $13.6 billion.
American Express is the fifth-largest holding at Berkshire Hathaway. Owning 151.6 million shares of AXP, Berkshire’s stake is worth around $23.2 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 1.4%.
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 diversification — its products are sold in more than 200 countries and territories around the globe — 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 held Coca-Cola in his portfolio since the late ’80s. Today, Berkshire owns 400 million shares of the company, worth approximately $24.1 billion.
You can lock in a dividend yield of 2.9% on Coca-Cola’s shares at current prices.
No one who spends $1,600 for a fully decked-out iPhone 14 Pro Max would call it a steal. But consumers love splurging on Apple products anyway.
Earlier this year, management revealed that the company’s active installed base of hardware has surpassed 1.8 billion devices.
While competitors offer cheaper devices, millions of users don’t want to live outside of the Apple ecosystem. The ecosystem acts as an economic moat, allowing the company to earn oversized profits.
It also means that as inflation spikes, Apple can pass higher costs to its global consumer base…