Worried about a stock market crash? You're not alone. Some stocks may have bounced back from the tumble taken a month ago, but something still doesn't feel quite right at the moment. Bullish conviction seems low, and investors are clearly looking for safety while steering clear of growth.
If you're looking to make the same shift from an offensive to a defensive posture but don't want to get out of the market altogether, you might want to consider poaching a few picks from Warren Buffett's Berkshire Hathaway (BRK.A -1.54%) (BRK.B -1.77%) portfolio.
Here's a look at three Buffett stocks to consider. Please notice that all three sell something that will remain in demand even during economically turbulent times.
1. Procter & Gamble
You've heard of the company, though it's possible you're underestimating the sheer number of goods Procter & Gamble (PG 0.11%) sells. Brands like Pampers diapers, Tide laundry detergent, Charmin toilet paper, and Gillette shaving supplies are all part of the P&G family. And that's just a sampling. Procter offers dozens of different products on store shelves that millions of consumers buy and use without giving them a second thought.
That's what Warren Buffett likes about the company: consistent cash flow and its corresponding dividend. The current yield of 2.5% isn't exactly thrilling, but P&G hasn't failed to make a quarterly dividend payment in the past 130 years, and it has upped its annual payout every year for the past 64.
There's another, less obvious reason to like Procter & Gamble's durability in the event of market turbulence. This company dominates the consumer goods industry, and as such, can afford to spend more on marketing than competitors like Colgate-Palmolive or Unilever.
And it does just that. Advertising industry news site Ad Age indicates P&G spent a whopping $10.7 billion on ads and marketing in its fiscal year ending in June of last year. For the first time since 1987, P&G's wasn't the world's biggest annual advertising outlay. It was second. Amazon took the lead with $11 billion worth of promotion.
Still, no other direct rival is going to come close to flexing the sort of marketing muscle Procter & Gamble can.
Telecom giant Verizon Communications (VZ -0.26%) is another key component of Berkshire's portfolio, accounting for more than $8 billion worth of the nearly $300 billion worth of equities the fund holds.
Like Procter & Gamble, Verizon is a cash cow. Also like Procter & Gamble (and perhaps even more so), it will remain a cash-generating machine in almost any conceivable environment. Folks will turn a vacation into a stay-cation, and they might postpone the purchase of a new car. But they're going to keep their phones turned on. The only question is which carrier is going to be providing service. Verizon does pretty well in terms of keeping customers on board. Last quarter's consumer churn rate was a mere 0.76%, while its business customer churn rate came in at just a bit less than 1%.
Granted, Verizon doesn't have the same dividend pedigree Procter & Gamble boasts. Its annual payout has also grown every year since 2005, but it hasn't attained Dividend Aristocrat status (an S&P 500 company that has raised its dividend for at least 25 consecutive years). This company clearly seems intent on becoming one, though, which of course would bolster its stature within the investing community.
There's no question of fiscal feasibility either. Last year's earnings of $4.30 per share was easily more than enough to fund the full-year dividend of $2.48 per share, and despite the pandemic, 2020 was a fairly typical year for the company.
3. Sirius XM
It seems an unusual choice on the surface. The Oracle of Omaha typically eschews technology stocks, not only because he says he doesn't understand the business, but also because he's aware that competitors can often easily replicate a key technology.
That's not a likely outcome in Sirius XM's case, however. See, Sirius relies on technology to deliver digital audio from satellites to the earth's surface. The company's actual competitive feature that can't be replicated, however, is the breadth and depth of on-air talent already committed to the only name in the satellite radio (and now internet radio, since Sirius also owns Pandora) business. Howard Stern, Kevin Hart, and Andy Cohen are just some of the stars who call Sirius their radio home. Then there's sports programming that's often not available anywhere else, plus a huge variety of music stations organized by genre. Consumer habits have been forged.
The real draw for safety-minded investors to Sirius, however, is once again the reliable cash flow.
Access to programming is paid for on a monthly basis. To grow, Sirius simply needs to focus on scaling up its existing operation, which it has with amazing consistency. With the exception of last year's COVID-crimped second quarter, revenue has improved on a year-over-year basis every quarter since 2008 when rivals Sirius and XM merged. Operating income and EBITDA have also steadily grown since then, until the fourth quarter of last year when the company booked nearly a $1 billion impairment charge connected to its acquisition of Pandora. Were it not for that, it would have been another year of sales and earnings growth.
The dividend yield of 0.9% admittedly leaves something to be desired by income-seeking investors. But if your primary goal is safety through a recession-resistant business operation, this one offers just that.