Warren Buffett said on Saturday that the incredible period for the US economy is coming to an end and that the majority of Berkshire’s businesses will report lower earnings this year than last year.
This week’s question is: what are the best stocks for a weakening economy or recession?
This thread is open to all and will remain open for one week. Please leave your comments below!
[Nothing on this page should be construed as investment advice. This is for discussion and information purposes only].
Really depends on how defensive or aggressive one wants to be because the most defensive play is to not be in stocks at all. Bonds for example are interesting for the first time in a long while.
Meanwhile, I’m no expert on macroeconomic forecasting but I’m in the “maybe this won’t be so bad or last so long” camp. At the least, we are looking at one of the most anticipated recessions ever. Thus I’m more inclined to be patient and bet that the general direction over the long haul will be up.
For example, I feel comfortable making a big bet on major banks at these prices. I also like SLGN, SCL, and TREX. I wish I had been more patient with APP.
Yeah, it feels a bit late to me to start getting bearish on the overall market. So many of the growth stocks are already down huge. No real idea but my best guess (which I've held for a while) is that we trade in a range for the next 2/3 years.
On the small/mid cap side, I think Vince's pick of ABM remains interesting. ABM provides janitorial services, parking lot management, mechanical and engineering expertise -- things that need to be paid for even in a recession. The company also stands to benefit from a loosening of the labor market (lower wage costs) and it pays a reasonable dividend. The stock is down only 2% from when the article was published so I think there's room to go higher: https://www.overlookedalpha.com/p/abm-industries-a-safe-place-to-ride
On the large cap side, I think Buffett himself said that he expects Berkshire to outperform the S&P during periods of economic weakness so that would be my pick. And that also makes me think of the Japanese trading businesses he bought which sport a healthy yield too.
Japanese companies are very healthy right now. Inflation in Japan is actually at “ideal” levels and the relatively weak JPY makes for currency tailwinds for domestic companies. Foreign companies operating in Japan are hurting and letting employees go (they over-hired) while Japan domestic companies are continuing to hire and grow.
They do get hit with higher costs from imports, and overall folks are in a defensive mode, looking for ways to reduce or keep costs down where they can.
The trading companies that Buffett invested in are A) already massive slow growing companies and B) their business is cyclical.
Certain industries like hospitality are booming right now though. I’ve never seen prices so crazy high and yet people are clearly still willing to pay.
Something countercyclical like groceries or utilities could work, too.
It all depends on what’s already “priced in” though. Getting that right is challenging.
Really depends on how defensive or aggressive one wants to be because the most defensive play is to not be in stocks at all. Bonds for example are interesting for the first time in a long while.
Meanwhile, I’m no expert on macroeconomic forecasting but I’m in the “maybe this won’t be so bad or last so long” camp. At the least, we are looking at one of the most anticipated recessions ever. Thus I’m more inclined to be patient and bet that the general direction over the long haul will be up.
For example, I feel comfortable making a big bet on major banks at these prices. I also like SLGN, SCL, and TREX. I wish I had been more patient with APP.
Yeah, it feels a bit late to me to start getting bearish on the overall market. So many of the growth stocks are already down huge. No real idea but my best guess (which I've held for a while) is that we trade in a range for the next 2/3 years.
MO- Altria group ..
CMCSA - Comcast
On the small/mid cap side, I think Vince's pick of ABM remains interesting. ABM provides janitorial services, parking lot management, mechanical and engineering expertise -- things that need to be paid for even in a recession. The company also stands to benefit from a loosening of the labor market (lower wage costs) and it pays a reasonable dividend. The stock is down only 2% from when the article was published so I think there's room to go higher: https://www.overlookedalpha.com/p/abm-industries-a-safe-place-to-ride
On the large cap side, I think Buffett himself said that he expects Berkshire to outperform the S&P during periods of economic weakness so that would be my pick. And that also makes me think of the Japanese trading businesses he bought which sport a healthy yield too.
Japanese companies are very healthy right now. Inflation in Japan is actually at “ideal” levels and the relatively weak JPY makes for currency tailwinds for domestic companies. Foreign companies operating in Japan are hurting and letting employees go (they over-hired) while Japan domestic companies are continuing to hire and grow.
They do get hit with higher costs from imports, and overall folks are in a defensive mode, looking for ways to reduce or keep costs down where they can.
The trading companies that Buffett invested in are A) already massive slow growing companies and B) their business is cyclical.
Certain industries like hospitality are booming right now though. I’ve never seen prices so crazy high and yet people are clearly still willing to pay.
Something countercyclical like groceries or utilities could work, too.
It all depends on what’s already “priced in” though. Getting that right is challenging.