According to the world’s most famous investor, the “incredible period” for the U.S. economy has been coming to an end in recent months. And even his own company, Berkshire Hathaway, isn’t immune.
“The majority of our businesses will report lower earnings this year than last year,” Buffett cautioned at Berkshire’s annual meeting in early May.
Don't miss
-
Commercial real estate has outperformed the S&P 500 over 25 years. Here's how to diversify your portfolio without the headache of being a landlord
-
Blackrock’s CEO says art is a ‘serious asset class’ — here’s how you can own a piece of a Pablo Picasso
-
Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
That’s a somewhat surprising statement from a man who has famously been ultra-bullish on the U.S. economy.
But persistently high inflation, higher interest rates and the ongoing banking crisis have all made Buffett much more concerned about investment gains in the year ahead. His partner, Charlie Munger, echoed this sentiment. “Get used to making less,” Munger quipped.
The duo’s pessimism about the economy was also reflected in the company’s investment portfolio.
Berkshire Hathaway was a net seller of equities in the first quarter of 2023, pocketing $10.4 billion in stock sales after deducting purchases. The company’s cash hoard expanded from $128.6 billion at the end of last year to roughly $130.6 billion.
Investors should probably heed the Oracle of Omaha’s warning, but that doesn’t mean completely retreating from the market is the right strategy.
Instead, recession-resistant assets and international stocks could diversify a portfolio enough to withstand those downward forces.
Portfolio shockproofing
Some service sectors are relatively detached from the rest of the economy. Usually, these businesses are backed by a trove of hard, recession-resistant assets that retain their value through inflationary waves.
Caretrust REIT (CTRE) is a good example. The company owns and operates healthcare properties across the country. With over 21,795 hospital beds spread across 23 states and 204 properties, this real estate investment trust could serve as a loose proxy for America’s private health care industry.
The stock offers a 5.56% dividend yield and might be an ideal anchor for a portfolio during a recession.
Commercial real estate is another great option, with the category outperforming the S&P 500 over a 25-year period. And while it's traditionally been an investing opportunity exclusive to the ultra wealthy, new platforms make it possible for everyone to get in on the ground floor.