ASSET-LIGHT BUSINESSES ARE THE WAY TO GO
The Stocks You Should Invest In When Inflation Spikes, According To Warren Buffett
Buffett has managed portfolios through some big inflationary moments. Here's what he would do this time.
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The Lede
In his 1981 letter, Buffett outlined two important characteristics that determine whether or not a business will handle an inflationary environment— an ability to increase prices easily and an ability to take on more business without having to spend too much in order to do it. This means investing in asset-light businesses that have high pricing power. Here're three companies that fit the bill.
Additional Thoughts
- Nike (NKE) : The global footwear company has high-profile brand ambassadors and good returns on equity (above 30 percent) and its direct-to-consumer model captures the full price. Shares are up 19 percent so far in 2021.
- Apple (AAPL) : Apple's brand identity is super strong and their hardware products continue to fly off shelves. Buffet's portfolio at Berkshire Hathaway is 40 percent AAPL, which now trades around $150 per share.
- Levi Strauss & Co. (LEVI) : The denim business's revenues grew 41 percent in the last quarter and because their products are made using raw materials sourced from 24 countries, their supply chain remains robust during these times. Company shares are up roughly 30 percent this year.