The S&P 500 index, a benchmark for the broader stock market, briefly dipped into bear market territory last week, which means the index fell at least 20% in value from recent sustained highs. It has been a difficult year for the stock market and the pain may not be done yet. But with most stocks down this year, there are a lot of bargains out there.
With everything going on in the economy and in the world these days, the potential for lots more volatility and a recession is definitely there. Given that uncertainty, it may not be a bad idea for investors to take a look at blue-chip stocks which are well-known, high-quality companies that are leaders in their industries.
Here are three good blue-chip stocks to check out as the S&P 500 flirts with bear territory.
1. Berkshire Hathaway
While most stocks are trading down a lot this year, Warren Buffett's company, Berkshire Hathaway (BRK.A -0.45%) (BRK.B -0.63%), has managed to stay roughly flat on the year, widely outperforming the S&P 500. Many people mocked Buffett and Berkshire for not doing much buying in the early parts of the pandemic, but it looks like the Oracle of Omaha has been proven right yet again.
Berkshire is a conglomerate filled with lots of different businesses including insurance, real estate, energy, and railroads. The company has its own Berkshire Hathaway brands and also owns big companies like Geico and the Burlington North Santa Fe Railway. Berkshire also manages a $326 billion-plus portfolio that has large positions in dozens of companies, including Apple, Bank of America, Chevron, and Coca-Cola. The portfolio has lots of diversity and exposure to inflation-hedging businesses, which makes it a great buy amid the market turbulence.
2. JPMorgan Chase
America's largest bank by assets, JPMorgan Chase's (JPM -1.04%) stock price has fallen more than 27% this year amid high inflation, rising interest rates, and fears of a recession. Those factors aren't great for banks because of how linked to the economy they are. Investors were also not pleased on recent earnings calls when JPMorgan guided for expense growth of more than 8% in 2022. But the bank will also benefit from rising interest rates, which most banks do, and I suspect this intense market volatility has benefited the bank's trading businesses.
JPMorgan Chase is also a bank that has a track record of surviving intense recessions. It's one of the few large banks that made it out of the Great Recession in better shape than when it entered. It also held up very nicely during the pandemic and the bank could have managed through an environment in which it took tens of billions of loan losses, which didn't end up happening. Trading at 177% of its tangible book value, or net worth, I wouldn't exactly call JPMorgan stock cheap, but I still think it's a good valuation to get in for a bank that does pretty much everything really well.
The sprawling payments network Mastercard (MA -1.77%) has built a strong moat. It helps businesses and consumers process payments in more than 200 countries and has developed one of the largest payment rails in the world. The company has issued nearly 2.9 billion credit and debit cards and saw $7.7 trillion of payments go through its network in 2021.
Mastercard can fight inflation because its business naturally has a lot of fixed costs and it makes money largely by collecting a small fee for each transaction that goes through its network. So, if inflation makes goods and services cost more the network will realize higher fees. Like a lot of financial stocks, a recession would likely hurt Mastercard's business because it could hamper consumer spending. But this is a well-established company that has developed a business that is hard to replicate because of its incredible scale. Mastercard will also benefit as digital payments and e-commerce continue to become more ubiquitous.