Three shares Warren Buffett has bet on amid rising inflation

August 06, 2022 07:00 AM AEST | By Ashish

Three shares Warren Buffett has bet on amid rising inflation — Image source: © Djbobus | Megapixl.com

Highlights

Consumer prices have risen sharply in the past few months.

It has left markets worried about increased volatility and looming recession.

However, legendary investor Warren Buffett has increased his stake in some stocks during these times.

Inflation has stormed higher across the world in the past few months. In the US, the inflation rate has hit a record high of 9.1% as of June 2022. Similarly, the Australian consumer price inflation rose to a 21-year high last quarter, while the annual inflation rate jumped to 6.1% from 5.1%. Not only investors are worried of rising inflation, but also looming recession.

However, there is one investor who has successfully survived many such challenging scenarios in the past. Nothing has stopped this legendary investor from parking his company’s cash into various stocks even during hard times.

We are talking about none other than the perfect case of Berkshire Hathaway’s CEO Warren Buffett. Here, we would zero in on three stocks in which the Oracle of Omaha’s firm has piled into as consume prices rise.

Chevron Corporation (NYSE:CVX)

Chevron is one of the topmost integrated energy corporations in the US. As of July 2022, Chevron enjoyed the fifth largest position in Buffett’s investment portfolio. Berkshire Hathaway added over 120 million shares of Chevron in the first quarter.

Buffett may have picked the energy stock with a view that the prices of oil and natural gas might remain elevated for a long period of time. Since energy companies such as Chevron generate their operating margins from upstream drilling segments, these stocks are expected to do well due to higher commodity prices. Additionally, Chevron is among the companies with lowest debt-to-equity ratios in the US oil industry.

Citigroup Inc.

Berkshire Hathaway added over 55 million shares of banking major Citigroup in the first quarter. Other investors may not add banking stocks amid looming inflation as loan defaults rise in such a scenario. However, Buffett thinks differently. He may have reckoned that recession might last for only a short period of time, while economic expansion goes on for a longer period.

Rising inflation forces central banks to hike official cash rates. It may result in a rise of loan delinquencies, forcing Citigroup to set aside capital for loan losses. However, banks ultimately benefit from higher net-interest income as a result of hike in rates.

Activision Blizzard

Buffett informed investors during Berkshire Hathaway’s annual shareholder meeting in April that his position on gaming firm Activision Blizzard has grown to 9.5% from 8.2% at the end of the first quarter. It implies that Buffett’s firm now holds nearly 74 million shares of Activision –this despite the fact that Buffett is not known to be a big admirer of tech stocks.

Buffett may have bet on this gaming stock due to potential arbitrage opportunity. Notably, Microsoft in January this year announced a deal to acquire Activision in an all-cash offer.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.