- (1:30) – Navigating A High Inflation Market: What Was Going On In The 1970’s?
- (8:15) – What Was Berkshire Hathaway Buying During High Inflation?
- (20:45) – Big Takeaway’s From The Pasts High Inflation Markets: HES, KHC, MDLZ, CLF, BTI, GATX
- [email protected]
Welcome to Episode #286 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
This week, she’s been taking a closer look at what Warren Buffett, and Berkshire Hathaway, were up to in the last period of high inflation during the 1970s.
Want to take a trial of Tracey’s Value Investor portfolio?
Zacks is promoting it again this week.
As promised, you can do so here.
Consulting the Berkshire Hathaway Annual Letters
The Berkshire Hathaway Chairman’s Letters are available online. Tracey started with 1978’s letter because that’s when inflation started to surge and Buffett started adding more of his folksy style into the letters.
In 1978, he talked about the “bonanza period” for insurance the prior three years where Berkshire’s per share net worth virtually doubled, compounding at about 25% annually.
But Mr. Buffett didn’t just own companies, he also bought stock through his insurance portfolios. In 1978 he had 13 holdings.
These stocks give us some insights into what Berkshire Hathaway was investing in to try and contain the damage from rising inflation.
Buffett Discusses Inflation
In the letters through 1981, Buffett directly addresses the difficulty of owning shares in companies when inflation is at double digits. Those discussions are a master class on how inflation erodes equity returns.
In addition, he also addresses the benefits of dollar cost averaging as stocks fall.
What was Berkshire Hathaway buying during these years of high inflation?
Diving Into Berkshire Hathaway’s 1970s Investing Playbook
1. Hess Corporation (HES – Free Report)
Hess Corporation is an independent oil and natural gas company with operations in the US, Guyana and Malaysia. In 1978, Berkshire owned the prior incarnation of Hess which was Amerada Hess. Berkshire sold it by 1979.
Hess is up 39% in 2022. It pays a base dividend of 1.4%.
Oil was one of the big winners of the 1970s. Energy stocks were too.
Should value investors be looking at Hess in 2022?
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