Concerns about a potential stock market crash on the horizon are driving valuations lower in the equity markets. Investors are now pricing in higher for longer interest rates, which have pushed the yield on the 10 year U.S. Treasury to more than 4.7%. Accordingly, with interest rates on the rise, it’s reasonable to see higher-yielding stocks and other pockets of the stock market take a hit.
This pain has been uneven, and there are still certain winners in this environment. Investors still clearly want safer, more defensive stocks in these uncertain times. Thus, companies with reasonable price-earnings ratios that deliver capital to shareholders have have strong moats are great places to start. This is a list of three such stocks I would consider “all weather,” for those pacing back and forth, just waiting for the crash to start.
Maybe we’ll see a soft landing take hold. But if we don’t, these are the stocks I’m thinking could perform best in a significantly down market.
Berkshire Hathaway (BRK-B)
Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) diversified portfolio drove a 6.6% Q2 operating earnings increase, despite challenges in some segments. Berkshire’s unique and resilient holdings are likely to outperform the market over time. Warren Buffett’s legacy will live on through his capable successor team, making this stock a safe long-term investment for those seeking exposure to industrials and economically-sensitive names.
Berkshire’s Q2 operating earnings surged 7% to $10 billion, a new quarterly record. Despite overall net earnings turning to a $35.9 billion profit due to stock gains, Buffett emphasizes that operating earnings best reflect the company’s core performance, which remains strong.
In essence, Berkshire’s top-tier operating businesses, coupled with Buffett’s steadfast approach, consistently deliver strong results regardless of market conditions. While others fret over U.S. Federal Reserve rate hikes, supply chain issues and recession fears, Berkshire maintains its steady performance, making it a top pick for cautious investors seeking defensive options for a stock market crash.
Apple (NASDAQ:AAPL), the world’s most valuable company, has achieved record-breaking success in its 47-year history. Leading market shares in various product categories, particularly with the iPhone, which boasts over a billion users, have fueled its remarkable 135,000% stock growth since going public in December 1980. While Apple’s ascent may make it seem like the best time to invest was in the past, it continues to deliver consistent gains, with Warren Buffett’s Berkshire Hathaway increasing its stake in the company in Q1 2023.
Apple’s iPhone 15 launch is a hit, even in China. With a 50-day global order fulfillment time and a 10% sales increase compared to the iPhone 14, it’s gaining momentum. The upcoming Vision Pro augmented reality headset, priced at $3,500, is generating buzz.
Despite a modest start, the device has achieved remarkable lead times in North America, impressing many. Analyst Dan Ives of Wedbush Securities predicts a bullish AAPL trajectory, aiming for $240 per share this year, making it an enticing blue-chip stock. I think AAPL stock is likely to hold its value well, even in a downturn, relative to other tech stocks. Thus, those looking to maintain a diversified portfolio during a stock market crash can’t really go wrong owning this name for tech exposure.
There are some reasons why investors may think Coca-Cola (NYSE:KO) doesn’t deserve a place on this list. The world’s largest beverage producer faces declining sales due to changing consumer preferences. Additionally, recent revenue growth previously relied on price hikes, not higher sales volumes. And the rise of weight-loss drugs may further erode its market share as people choose healthier alternatives. Diversification and innovation efforts may struggle to offset core business decline.
Those are plenty of negatives. However, Coca-Cola, a Dividend King with 62 consecutive years of dividend increases, is yet another stock Warren Buffett believes in. This company is prominently featured in Berkshire Hathaway’s portfolio, which owns around 9% of the company’s stock. Berkshire Hathaway is set to receive $736 million in dividends from its investment this year.
The reason for this is simple. Coca-Cola is a resilient choice in uncertain economic times, with a predicted recession looming in late 2023 or early 2024. Recent financials are impressive, with Q2 2023 revenue at $11.97 billion, a 5.71% year-over-year increase, and net income of $2.55 billion, up 33.7% year-over-year. Its diluted earnings per share of 59 cents surpassed analyst expectations by 8.14%. Indeed, KO remains a top stock pick for any portfolio.
On the date of publication, Chris MacDonald has a LONG position in AAPL, BRK-B, KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.