Every bear market is different. They have a variety of contributing causes. They don’t last the same amount of time.
But there’s at least one thing that every bear market has in common: They all offer great opportunities for long-term investors. No one knows this better than Warren Buffett. He has long preached that it’s best to “be fearful when others are greedy and greedy when others are fearful.”
And you don’t have to look any further than Berkshire Hathaway‘s portfolio to get some good ideas about stocks to scoop up right now. Here are three top Buffett stocks to buy in this bear market.
What’s the main reason behind the current stock market sell-off? Perhaps the best answer is that the Federal Reserve is aggressively raising interest rates to fight skyrocketing inflation. Many investors are concerned that this could lead to an economic recession. But there are few Buffett stocks as inflation-proof right now as Chevron (NYSE: CVX).
Unsurprisingly, the Oracle of Omaha has been aggressively scooping up shares of the giant energy company. Chevron now ranks as the fourth-largest position in Berkshire’s portfolio. Two years ago, the stock wasn’t listed among Berkshire’s holdings at all.
Chevron has been one of Buffett’s biggest winners so far this year. The stock was up more than 50% year to date earlier this month before giving up some of those gains.
Fuel prices seem likely to remain at high levels over the near term, which works to Chevron’s benefit. The company is also betting big on hydrogen production as part of its long-term strategy.
Berkshire bought only eight new stocks during the first quarter of 2022. McKesson (NYSE: MCK) is arguably one of the two best of the bunch — especially for times like these.
The company is probably best known as a top pharmaceutical distributor. This business generated more than 80% of McKesson’s total revenue in Q1. However, McKesson is also a leading provider of prescription technology solutions and medical-surgical solutions.
Buffett is no doubt glad now that he (or one of his investment managers) bought McKesson. The stock has soared more than 20% so far this year, making it one of the top performers in Berkshire’s portfolio.
McKesson’s business tends to be resilient during economic downturns. The company is also squarely focused on generating long-term growth. It’s planning to exit the European market as part of its streamlining efforts to shift attention to stronger growth opportunities.
3. Johnson & Johnson
To be sure, Johnson & Johnson (NYSE: JNJ) isn’t one of Buffett’s favorite stocks. He trimmed Berkshire’s position in the healthcare giant years ago and hasn’t added any shares in a long time. But J&J is an ideal stock to own in this bear market for a couple of key reasons.
First, the company is largely (although not completely) immune to macroeconomic headwinds. Physicians won’t stop prescribing J&J’s medicines because interest rates are rising. Second, Johnson & Johnson is a Dividend King with the kind of solid dividend investors flock to during uncertain times.
J&J’s share price hasn’t soared so far in 2022 like Chevron’s and McKesson’s share prices have. However, the stock has held its own — and handily trounced the S&P 500.
Importantly, Johnson & Johnson’s growth prospects should improve in the not-too-distant future. The company plans to spin off its consumer healthcare business next year. This will leave it with its faster-growing pharmaceuticals and medical devices segments.
Johnson & Johnson has shown staying power throughout bear markets over the past 136 years. There’s every reason to expect the company will do so through this one as well.
Keith Speights has positions in Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends Johnson & Johnson and McKesson 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.