While one of the world’s best investors, John Paulson, is making a big bet on gold, another — Warren Buffett — is looking elsewhere. David Pett of Canada’s Financial Post notes that Berkshire Hathaway’s latest holdings disclosure “indicates that the world’s greatest investor isn’t loading up on gold or precious metals. Indeed, he lists no mining companies among his holdings.”
The lack of gold in Berkshire’s portfolio is notable, Pett says, because Buffett has said he expects to see major inflation in the coming years, and gold is often thought of as a good inflation hedge. But instead of gold-related investments, Buffett has been buying shares in firms like Exxon Mobil, Burlington Northern Santa Fe Corp., Wal-Mart, and Nestle S.A., and continues to hold major stakes in American Express and Coca-Cola.
“Buffett appears to have his own strategy for dealing with inflation,” Pett concludes. “His theory seems to be that the best protection against inflation comes by investing in companies that have the ability to pass on price increases. A company can have pricing power if it controls a scarce resource (Exxon and Burlington Northern) or if it owns a favored brand (Nestle and Coca-Cola) or because it’s the biggest and most effective competitor in its field (Wal-mart). All those companies occupy large places in Berkshire’s investment portfolio.”
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