What Would Charlie Munger Do? 3 Stocks Built for Resilience

On the Agenda

• Coca-Cola KO — Q2 organic sales growth of 11% and an unyielding 61-year run of dividend growth. Trading 17% cheaper YTD.
• Realty Income — Forward dividend yield of more than 5.5%  and a tenant-borne expenses model that cushions against inflation amid REIT turbulence.
• Mondelez International MDLZ — 17% YOY Q2 net revenue uplift, 37.7% organic growth in Latin America, and nine consecutive years of dividend hikes.

As inflation becomes a significant factor in global economic discussions and impacts monetary policy, investors are actively seeking reliable investments. Charlie Munger, Vice Chairman of Berkshire Hathaway, represents optimism in the face of economic challenges and advises investors to maintain a balanced and steady approach. Here are some stocks that demonstrate resilience during inflation and have the potential to offer sustainable returns.

Coca-Cola (KO)

Amidst a volatile market, Coca-Cola remains the consummate staple of Warren Buffett’s portfolio. Navigating through the second quarter of 2023, the company posted a solid 11% surge in both organic sales and EPS, outstripping previous estimates. Furthermore, with an impressive leap of 8.33% to 59 cent EPS comfortably exceeded analyst expectations.

As far as dividends go, Coca-Cola yields more than 3.2%, and backs that up with relentless 61-year trajectory of growth. Moreover, the company has diversified its product range, introducing non-cola and plant-based beverages, plus new VitaminWater flavors, expanding its market. Hence, with the company’s diverse beverage portfolio and a sprawling presence across two hundred countries globally, KO remains a haven. With the stock down more than 17% year-to-date, it’s perhaps the most opportune time to invest in it for the long haul.

Realty Income (O)

Realty Income stands out as one of the top players in the real estate investment trust (REIT) universe and one of the most popular monthly dividend businesses. It has positioned itself as a leading triple-net-trust, adopting a model where its tenants, not the landlords, bear the burden of primary expenses, including taxes, insurance and other costs. Such a strategy is particularly advantageous during inflationary periods, offering landlords a cushion against unexpected surges in expenses.

To be sure, even with its competitive edge, O has been unable to escape the broader REIT industry downturn: Rising interest rates have alarmed investors, translating to rising interest expenses for REITs. Consequently, O stock has dipped a remarkable 22% YTD. But eagle-eyed investors may see the slump as an attractive entry point: Its shares boast a forward dividend yield of more than 5.5% while trading at a forward price-to-AFFO per share ratio slightly below the sector median.

Mondelez International (MDLZ) 

Mondelez International — a multinational titan in confectionery, food and beverage — is well-positioned to benefit from the paradigm shift away from dining out and back to scouring grocery aisles. In the wake of Kraft Foods’ KHC 2012 restructuring, Mondelez now boasts a staggering annual revenue exceeding $28 billion, commanding a significant influence, especially in developing regions, which generate more than 60% of its revenue. Mondelez’s second quarter of 2023 saw net revenue swell by a robust 17% year-over-year, powered by 15.8% organic net revenue growth and steered by impressive volume/mix performance. This vibrant growth mix is punctuated by Latin America’s stellar 37.7% organic net revenue growth, and strong gains in other global regions. Amid nine years of consecutive dividend increases and a recent 10.4% uptick to 42 cents per quarter, Mondelez, with a 50% dividend payout ratio, promises resilience in a recessionary environment.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer.