After decades in the financial markets, it takes a lot to faze Warren Buffett. Indeed, Buffett was one of the voices of reason while others – including yours truly – felt America was due for a reckoning because of the novel coronavirus. During the pandemic doldrums, the renowned investor stated the economy will recover. That boded very well for stocks to buy.
Certainly, those who heeded the Oracle of Omaha’s words – and picked the right names – enjoyed substantial profitability. However, those who are reading between the lines may want to at least consider a different approach for their future stocks to buy. Now, I’m not suggesting that Buffett is going back on his words. After all, he declared that even during the biggest crises the U.S. had faced, he was confident that the nation could overcome.
Still, this year, Buffett seems to acknowledge that the pandemic has been a bigger threat than perhaps he initially calculated. During an interview with CNBC’s Becky Quick, he said, “The economic impact has been this extremely uneven thing where … many hundreds of thousands or millions of small businesses have been hurt in a terrible way, but most of the big companies have overwhelmingly done fine.”
A few months ago, Buffett stated his “his portfolio companies were ‘seeing very substantial inflation’ in a range of sectors amid shortages of raw materials and high savings among those who kept jobs but were barred from spending on things such as holidays during lockdowns.” While I’ve discussed evidence about deflation, the bigger point is Buffett seems concerned about the underlying economic health. This may necessitate a different strategy toward stocks to buy.
Of course, no one person has a crystal ball on future events. You’re going to want to do your own research no matter who the messenger is. But given the prominence of Warren Buffett, now might be a time to consider these stocks to buy if you’re worried about pandemic unpredictability:
- Berkshire Hathaway (NYSE:BRK.B)
- Home Depot (NYSE:HD)
- Johnson & Johnson (NYSE:JNJ)
- Twilio (NYSE:TWLO)
- Dollar General (NYSE:DG)
- Essential Utilities (NYSE:WTRG)
- Olin (NYSE:OLN)
Before we move forward, the point of this article is not to recommend a wholesale shift in your portfolio. Rather, as a defensive idea, it may be wise to consider balancing your exposure to just a few hot sectors. With many questions still unanswered, these reliable stocks to buy could help you sleep a little easier.
Stocks to Buy: Berkshire Hathaway (BRK.B)
If you’re concerned about what might lie ahead in the new normal, you might as well consider Berkshire Hathaway as tops on your short list of stocks to buy. Yes, it’s an obvious idea – the lowest of low-hanging fruit. But I couldn’t help myself. Sometimes, you got to take the freebies that present themselves to you!
But even if BRK.B stock had absolutely nothing to do with Warren Buffett, it would still make sense for worried investors to consider adding to their portfolio. Principally, the multinational conglomerate owns businesses across a wide spectrum of industries. To be sure, such exposure means that Berkshire Hathaway suffered adverse impact from the Covid-19 crisis. However, it was able to trudge ahead because of its business category diversification.
Thanks to its resilient profile, BRK.B gained more than 52% in the trailing year. Further, the underlying company has a solid balance sheet with strong and consistent free cash flow. These attributes give Berkshire a buffer should it find itself in another war of attrition.
Home Depot (HD)
While most investors know Home Depot as a dependable long-term asset, it’s also a feel-good story. During natural disasters and other calamities, Home Depot represents a source of confidence, staying open to serve the community.
It might be strange to express gratitude toward a blue-chip company but I’m actually grateful for the home improvement retailer. During the Covid-19 lockdowns, management introduced convenient shopping hours while many other critical retailers – including grocery stores – had less-than-desirable accommodations. So kudos to the whole team.
If worse comes to worst and the delta variant, the lambda variant and all the variants up and down the Greek alphabet culminate in waves upon waves of coronaviruses, HD would be one of the best stocks to buy. It’s not just an anecdotally resilient. According to its financial statements, Home Depot generated $132.1 billion in revenue for the year ended Jan. 31, 2021.
That’s up nearly 20% from the year-ago period, which truly demonstrates that Home Depot is built to withstand trouble. If you’re worried about it all, this is one of the stocks to buy.
Stocks to Buy: Johnson & Johnson (JNJ)
If your fears about the pandemic don’t just relate to the economic impact but the public health threat as well, you might want to add Johnson & Johnson to your portfolio. First and foremost, the company is one of the top players in the Covid-19 vaccination space. And while its vaccine suffered from headlines about possible blood clots, as Yale Medicine reminded us, the risk of this and other serious side effects is low.
Second, Johnson & Johnson is a healthcare giant, featuring multiple products and over-the-counter medicines to help people deal with Covid-related symptoms should another wave of infections occur. Presumably, then, over-the-counter meds will be more effective. In turn, this should make JNJ stock more relevant.
Lastly, JNJ has risen above the muck. Over the trailing year, JNJ is up nearly 17%. Additionally, its 2020 revenue of $82.6 billion slightly beat out 2019’s tally. Thus, JNJ is one of the stocks to buy with proven resilience.
Twilio (TWLO)
If you’re thinking about defensive stocks to buy for a possible resurgence of the pandemic, a technology firm like Twilio doesn’t immediately come to mind. Frankly, growth names that don’t pay any dividends tend to perform poorly during market corrections. Therefore, TWLO seems a poor choice, especially if you’re a fan of Buffett’s investing approach.
Still, relevance is the key for why Twilio could survive another pandemic-related onslaught. First, the company’s core business of communication APIs (which stands for application programming interface) has proven incredibly powerful as companies rapidly transitioned to contactless services. Basically, APIs allow enterprise clients to connect with their customers through various communication channels but managed under a single platform.
So, even if you don’t know which company will prosper during another wave, you can be sure that they’ll use APIs. Therefore, it pays to invest in a company that specializes in this technology.
As well, Twilio offers two-factor authentication (2FA) services via is Authy app. With the blockchain and other digital innovations becoming more popular, security will become even more crucial. Twilio is leading in this department, making TWLO one of the stocks to buy.
Stocks to Buy: Dollar General (DG)
In one of the surprising stories I’ve read over the years, CNBC reported that former President Jimmy Carter lives in a house assessed at just $167,000. That’s in stark contrast to the comfortable lifestyles that former presidents live – and I’m not just referring to The Donald.
But what was more startling was that Carter sometimes buys clothes at his local Dollar General store. I understand that aspiring presidents do this to make them seem normal. But this must be the first I’ve heard of a president shopping at a discount retailer after retiring from politics.
Good for him. Carter’s anti-profligacy also provides lessons regarding stocks to buy in case the pandemic’s impact lingers longer than expected. As I mentioned earlier, Buffett warned that Covid-19 delivered an uneven blow to the economy, with big businesses doing just fine while smaller businesses suffered the bulk of the damage.
If Main Street continues to hurt, Dollar General could see rising demand. It’s a cynical argument but it’s worth considering if you’re worried about rising infections.
Essential Utilities (WTRG)
Whenever I listen to Buffett speak, he’s always got an eye out deep over the horizon. For instance, when discussing the Covid-19 crisis, the Oracle of Omaha warned that a new pandemic will arrive that will be worse than what we experienced with the coronavirus.
Mainly, he believes that Americans, despite learning the lessons of the public health crisis, remain unprepared to handle another serious event. Hopefully, that’s not the case but it’s difficult not to see the evidence of what he’s referring to.
For example, water reservoir levels have fallen to worrying lows, presenting an ominous headwind for the U.S. Southwest. What’s worse, this matter has been an ongoing problem. It’s not as if water levels just dropped one day.
Thus, from a purely cynical perspective, jittery investors should consider adding Essential Utilities to their stocks to buy. A utility firm that provides drinking water and wastewater treatment infrastructures and services, Essential lives up to its corporate name. Further, rising demand will probably support WTRG prices for years to come.
Stocks to Buy: Olin (OLN)
If you’re a straight-shooting, no-nonsense type of person, you know that if another wave of the coronavirus engulfs us, we’re probably not going to hold hands and sing “Kumbaya.” No, quite the opposite – the evidence states that we’re going to be at each other’s throats. And by evidence, I’m talking about record-breaking gun sales.
Of course, it’s difficult to discuss firearms-related investments in polite company. Plus, I can’t imagine that someone of Buffett’s reputation would want anything to do with pure-play gun stocks to buy. Therefore, if you’re leery about the toxicity of this space but still want to profit from the “fear trade,” then Olin could be right for you.
Principally, Olin is a chemicals firm and therefore provides you cover if you face questions regarding your motivations. But through its ownership of Winchester, the company is also a major ammunition manufacturer. And ammo happens to be one of the hottest market segments over the trailing year.
Due to the panic buying of guns, ammo has jumped to what I believe is an unprecedented premium. Should we have another outbreak, that’s it – OLN will soar higher than it already did.
On the date of publication, Josh Enomoto 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, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.