The U.S. economy is "perilously close to slipping into recession" because of President Donald Trump's tariffs, according to JPMorgan Chase chief economist Michael Feroli. Should investors worry? I can think of one who won't.
Warren Buffett famously said he likes to "be fearful when others are greedy and greedy when others are fearful." The legendary investor is well-prepared to be greedy if a recession hits. He's built a cash stockpile topping $334 billion for Berkshire Hathaway, the most cash the conglomerate has ever had.
What kinds of stocks might Buffett buy if a recession is on the way? Perhaps the past is a predictor of the future. Here are all the stocks Buffett bought in the last two recessions.
Image source: The Motley Fool.
Stocks Buffett bought in the Great Recession
The Great Recession started in late 2007 and ended in mid-2009. This recession earned its name because it was the worst economic downturn for the U.S. since the Great Depression.
Buffett bought quite a few stocks during the Great Recession. Most were additions to existing positions in Berkshire Hathaway's portfolio. These purchases included:
Burlington Northern Santa Fe (which Berkshire eventually acquired)
CarMax
Comdisco (which later went bankrupt)
Ingersoll Rand
Iron Mountain
Johnson & Johnson(NYSE: JNJ)
Kraft Foods(NASDAQ: KHC) (which later merged with Heinz to become Kraft Heinz)
M&T Bank
Sanofi(NASDAQ: SNY)
U.S. Bancorp
Union Pacific
UnitedHealth Group(NYSE: UNH)
Wells Fargo
WellPoint (which later changed its name to Anthem and then to Elevance Health(NYSE: ELV))
Berkshire didn't keep its full stakes in all of these stocks throughout the Great Recession. For example, the conglomerate sold shares of several, including CarMax and UnitedHealth Group.
He also initiated a few new positions during the Great Recession. In the second quarter of 2008, Buffett bought shares of NRG Energy. The next quarter, he opened stakes in ConocoPhillips and Eaton. In the fourth quarter of 2008, Buffett bought shares of Constellation Energy and Nalco Holding, which is now part of Ecolab. As the recession was winding down, he initiated a new position in Becton Dickinson.
Stocks Buffett bought in the COVID-19 recession
The COVID-19 pandemic ignited a recession that began in February 2020. However, it was short-lived, ending only two months later.
We don't know for sure which stocks Buffett bought during this narrow window. However, Berkshire Hathaway's regulatory filings reveal which stocks were purchased during the first and second quarters of 2020, when the U.S. economy was in a brief recession.
Buffett added to his stakes in two major airlines in Q1: Delta Air Lines and United Airlines. He also increased Berkshire's holding in PNC Financial Services.
In Q2, the "Oracle of Omaha" bought additional shares of Kroger(NYSE: KR), Store Capital (which was later acquired and taken private), and Suncor Energy. Perhaps surprisingly, Buffett initiated a new position in only one stock during this period. In Q2, he bought over 20.9 million shares of Barrick Gold(NYSE: GOLD). He also exited Berkshire's stakes in Delta Air Lines and United Airlines after adding to the positions in the previous quarter.
Are these stocks smart picks now?
Most of the stocks Buffett bought during the last two recessions are no longer in Berkshire Hathaway's portfolio. Are any of them smart picks to buy now? I think a few are.
Kroger and Kraft Heinz are pretty good defensive stocks to own when the market is volatile. I view Kroger as the better pick of the two, since cost-conscious consumers could opt to go with private-label foods instead of Kraft Heinz's brands if the economy worsens.
Many healthcare stocks should also hold up well. Elevance Health, Johnson & Johnson, and Sanofi have delivered gains while the stock market has plunged this year. UnitedHealth Group has also performed well year to date. All four stocks could remain good ones to own during overall market turbulence.
However, the biggest winner of all these previous Buffett recession buys is Barrick Gold. Gold is a perennial safe haven when the market is flailing. As a leading gold and copper mining company, Barrick has benefited as investors flocked to gold in recent months. The stock remains attractively valued with a forward earnings multiple below 12. I think Barrick Gold just might be the best of the bunch, at least over the near term.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Keith Speights has positions in Berkshire Hathaway and U.S. Bancorp. The Motley Fool has positions in and recommends Berkshire Hathaway, CarMax, Constellation Energy, JPMorgan Chase, PNC Financial Services, U.S. Bancorp, and Union Pacific. The Motley Fool recommends Delta Air Lines, Ecolab, Iron Mountain, Johnson & Johnson, Kraft Heinz, Kroger, and UnitedHealth Group. The Motley Fool has a disclosure policy.
