Warren Buffett has long expressed concern about inflation and it’s impact on businesses, stocks, and real investor returns. In the 1970’s See’s Candies showed Buffett and Munger the true power of a great business!
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Time stamps:
0:00 – Great businesses and inflation
1:53 – See’s Acquisition
2:50 – Growth and operating margins
4:53 – Pricing power vs. inflation
5:33 – Returns on tangible assets
8:49 – Final thoughts
Enjoy 🙂
Disclaimer:
I am not a financial adviser. This video is for education and entertainment purposes only. Seek professional help before making any investment decision.…(read more)
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Warren Buffett, the legendary investor and chairman of Berkshire Hathaway, is known for his savvy investment strategies and incredible success in the stock market. One of his most notable investment approaches is his ability to protect his assets from the effects of inflation. Buffett has often emphasized the importance of understanding the impact inflation can have on investments and has shared his own techniques to combat its effects.
Inflation, in simple terms, erodes the purchasing power of money over time. As prices rise, the value of currencies decreases, leading to the need for larger amounts of money to buy the same goods or services. This can greatly impact an investment portfolio’s returns if not appropriately addressed.
Buffett’s strategy involves investing in companies that have a strong ability to raise prices along with inflation. He focuses on businesses with durable competitive advantages that allow them to pass on cost increases to customers without compromising their market positions. Such companies are often found in consumer staples, utilities, and healthcare sectors, among others.
By investing in these inflation-proof businesses, Buffett ensures that his holdings maintain their value even if inflation rises. These companies have the capacity to adapt to inflationary pressures and continue generating profits regardless of economic conditions. In turn, this shields investors from the erosion that inflation can cause.
Buffett also highlights the significance of reliable cash flows. Companies with stable and predictable income streams are better equipped to handle inflationary pressures. Within Berkshire Hathaway’s portfolio, you will find businesses like Coca-Cola, Procter & Gamble, and Johnson & Johnson. These companies have a long history of generating strong cash flows, making them resilient in the face of inflation.
Moreover, Warren Buffett advocates for the long-term approach to investing. Instead of constantly moving assets, he believes in holding investments for extended periods, allowing compounding to work its magic. By remaining patient and focused on the underlying value of the investment rather than short-term market fluctuations, inflation’s impact can be effectively minimized.
While Buffett’s investment strategy may appear simple on the surface, its success is backed by empirical evidence. Berkshire Hathaway has consistently outperformed the market over the years, even during periods of high inflation. This showcases the effectiveness of Warren Buffett’s approach and his ability to navigate economic challenges.
However, it is important to note that no strategy is foolproof, and investing always carries risks. Economic conditions can change, and unexpected events can impact the market significantly. As with any investment, thorough research and careful consideration of individual circumstances are crucial before making any financial decisions.
In conclusion, Warren Buffett’s inflation-proof investment strategy relies on investing in businesses with durable competitive advantages, reliable cash flows, and long-term perspectives. By focusing on companies that can smoothly navigate inflationary pressures and generate consistent returns, Buffett has successfully protected his investments from the detrimental effects of rising prices. While every investor should tailor their strategy to their own circumstances, learning from the Oracle of Omaha’s wisdom can undoubtedly help navigate the complex world of investing.
"Anyone who isn’t investing now is missing a good opportunity." Imagine investing $1500 and receiving $11,020 profit in few days from Amber’s Investment.
Excellent video thanks Tom
Funny. I've never heard of this company outside investment/Buffet talks!
Videos like this Tom help keep us focused on what we should be looking for in the market. Thanks
A great company can keep up with money printing levels of 5% a year, maybe a handful can keep up with 10% a year, but when you start getting near or above 20% none of them remain inflation proof.
The US government current spending (Interest , entitlements etc) is 130% of the tax receipts they are taking in.
The way for them to increase tax receipts to pay for what they are spending is to inflate them.
They will eventually have to print again, and they have to print big or they will default.
Love these gems, been reading $BRK annual letters myself. They are quite entertaining.
Do you think the brands $tho owns give them an ability to raise prices? Maybe not increase their operating margins but sustain them as costs increase (pass on the increase in cost). I guess we can look at the results $tho has successfully been able to pass on the extra cost. I am just thinking weather that is because all rv companies increased prices or the brands $tho owns are more sought after.
Thinking from the customers perspective if I have enough money to get into rv, I am most likely to pay up extra for a brand with good reputation for producing well designed and reliable product.
Growing ROIC, while the tangible asset base is growing is really exceptional and very rarely seen.
I am challenging you to find me such a business today. 😀
I just kept thinking of Apple
Hi Tom, thanks for your video. I think that's why he likes so much apple, they seem to have great pricing power too.
Very interesting, and such an easy business to understand. It's almost the fake example business that's given out to show you how to invest
First