Warren Buffett recommends investing in this type of company in times of inflation

Spanish inflation in February February climbed to 7.6%, its highest level since December 1986, mainly due to the increase in the prices of electricity, restaurants, fuels and food. A maelstrom that shows no signs of abating and from which many investors seek to protect themselves. For all of them, these are the types of companies Warren Buffett recommends investing in in times of inflation.

Back in 1981, the CEO of Berkshire Hathaway explained in a letter to his shareholders the characteristics shared by companies that tend to resist in an inflationary environment. First of all, they must have ability to raise prices without fear of a significant loss of market share or unit volume. They also have to be able to accommodate large increases in business volume with little additional capital investment. These increases are usually caused by inflation, rather than real growth.

Nearly two decades later, at a 2009 shareholder meeting, Buffett said the first step to hedge against inflation is invest in yourself and your personal skills. According to the investment guru, being the best in your professional field allows you to get “your share of the national economic pie regardless of the value of the currency.” The second best protection is a company that maintains demand even after raising prices.

On the other hand, at the 2015 shareholders’ meeting, the CEO of Berkshire Hathaway assured that the best businesses during inflation are those that “they are bought once and it is not necessary to make new capital investments after“, such as real estate. Instead, he recommended avoiding “any business that requires a strong capital investment”, such as public services or railways, according to MarketWatch.

More recently, at last year’s shareholder meeting, Warren Buffett pointed out that better than trying to pick individual stocks, it’s opt for an index fund, such as the S&P 500 index. This advice can be applied both in inflationary periods and in more stable scenarios.

Buffett’s new bets

The billionaire CEO of Berkshire Hathaway has just jumped on the cryptocurrency hour, albeit in a roundabout way. Buffett has doubled his bet on Nubank, a Brazilian neobank, which also operates in Mexico and Colombia, which is focused on cryptocurrencies and praised for being one of the first to offer a bitcoin ETF. At the end of 2021, Berkshire Hathaway invested 500 million dollars in it and has now decided to ‘put’ another 1,000 million.

Another of Buffett’s movements has been that of the video game company Activision Blizzard. The famous investor has acquired $1 billion in stock the fourth quarter weeks before Microsoft announced in January its intention to buy it for nearly $69 billion. Berkshire Hathaway owns 14.66 million Activision shares valued at $975 million at the end of 2021, although they are now publicly traded at $80 a share and worth nearly $1 billion.

Regarding sales, Berkshire Hathaway decided to reduce its participation in Visa by just over 13%, while it did the same with Mastercard by 7%, about. Currently, Buffett’s company still owns about $1.4 billion in Mastercard and $1.8 billion in Visa. Two companies that have been in his portfolio since 2011.