It’s hard to overemphasize the positive impact that legendary investor Warren Buffett has had on the investing world. After more than half a century at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), Buffett continues to contribute to the collective knowledge base through his witty, down-to-earth comments on the state of the stock market and his preferred investing strategy.
Buffett would be the first to tell you that a stock market crash is inevitable, and when a long bull-market run ends, investors finally get a chance to see which stocks have strong businesses underpinning their long-term success. Below, you’ll find three Warren Buffett holdings that should help investors weather the coming stock market storm. They won’t necessarily avoid losses entirely in a crash, but they have the long-term staying power to recover for their shareholders.
Verizon Communications (NYSE: VZ), one of Buffett’s more recent stock picks, first became part of the Berkshire Hathaway portfolio in the fourth quarter of 2020. However, the Oracle of Omaha hasn’t pulled any punches in making the wireless telecom giant a major part of his holdings, as the stake in Verizon amounts to $9.2 billion and ranks sixth among Berkshire’s list of stocks.
Verizon checks many of the boxes that Buffett looks for in a great investment. As the leading provider of wireless telecom services, Verizon has played a key role in furthering technological advances and the mobile revolution. Although investing in upgraded 5G network technology will be costly, Verizon has demonstrated its ability to maintain some pricing power despite strong competition from other providers.
The steady stream of monthly subscription charges gives Verizon impressive levels of cash flow that the company has returned to shareholders through dividends. Verizon’s stock yields 4.5% currently, yet with an earnings multiple in the low teens, the telecom giant is one of the few areas in which traditional value metrics suggest a bargain opportunity. With a combination of growth prospects and stable and consistent dividend income, Verizon is a standard pick for Buffett’s methodology.
General Motors (NYSE: GM) has been in the Berkshire portfolio a lot longer, with purchases dating back to early 2012. At that time, GM was just emerging from its financial crisis-induced bankruptcy filing, having wiped out previous stock investors. Many investors were uncertain whether the Big 3 automaker would ever return to its former glory.
Fast forward nearly a decade, and General Motors looks a lot different. The automaker has embraced the electric vehicle (EV) movement, recently boosting its commitment toward EV investment from $20 billion to $35 billion over the next four years. The company’s Cruise subsidiary has made dramatic advances in autonomous driving, becoming the first company to offer ride-hailing services without a safety driver to California riders. Meanwhile, GM itself expects to introduce at least 30 new EV models by 2025, including electric versions of some iconic brand models. A big part of its success hinges on its Ultium in-house battery platform, but GM isn’t being stingy about putting financial resources behind its efforts.
General Motors doesn’t pay a dividend, but an earnings multiple below 10 shows that most investors are discounting the automaker’s growth potential. Buffett has often made a killing by betting against the crowd in situations like this, and he clearly sees greater prospects for GM than do most investors. Despite trimming its GM position recently, Berkshire still counts the automaker among its top 10 holdings.
Finally, Berkshire recently boosted its position in grocery giant Kroger (NYSE: KR). Buffett now owns about $1.8 billion worth of Kroger stock, giving it a nearly 7% stake in the company.
Kroger has a reliable business in consumer staples that has prospered over the past year and a half. Huge demand for necessities helped bolster Kroger’s stock early on in the COVID-19 pandemic, and the grocery chain has managed to build on that upward momentum to keep moving forward in 2021. Even as the company faces difficult comparisons over the rest of the year, Kroger is managing to surpass expectations in holding onto more of its gains.
With an earnings multiple above 20 and a dividend yield of less than 2%, Kroger might not seem like the most attractive of Warren Buffett stocks. However, its ability to hold up well even under difficult business conditions makes it a valuable holding, and dividend growth over the long run has helped reward longtime shareholders.
Be ready for the crash
The stock market has done extremely well lately, but smart investors are always ready for what could come next. With their attractive traits, Kroger, General Motors, and Verizon all have a lot going for them, and they’re in a better position than many other stocks to weather the next stock market crash and keep growing over the long run.
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Dan Caplinger owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Verizon Communications and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.