5 Great Warren Buffett Stocks to Hold Through the Next Recession (2024)

Editor’s note: “5 Great Warren Buffett Stocks to Hold Through the Next Recession” was previously published in October 2020. It has since been updated to include the most relevant information available.

If Warren Buffett does one thing right, it’s choosing stocks that will deliver through thick and thin. Buffett’s entire M.O. is based on long-term investing, choosing stocks that deliver steadily rising revenues/profits, holding them for decades, and collecting a big pile dividend checks along the way.

This simple strategy has helped the Oracle of Omaha become one of the world’s richest human beings and constantly generate gains for Berkshire Hathaway (NYSE:BRK.B).

However, the economy hasn’t always cooperated with Buffett. Over his long investing career, the U.S. economy has experienced plenty of ups and downs.

But for the Oracle, this hasn’t been a problem. The key for many Warren Buffett stocks comes down to their quality. Buffett only focuses on those firms with low debt, strong cash flows, rising sales, and top-notch management teams. This allows them to perform well even during recessions. While their share prices may falter a bit, their underlying businesses won’t. That helps Buffett sleep well at night.

And it can help you sleep well at night, too. With the economy getting dicey, it makes sense to take a page out of his playbook and focus on quality. With that, here are five Warren Buffett stocks to hold through the next recession.

Warren Buffett Stocks to Hold: M&T Bank Corporation (MTB)

There’s no doubt that Warren Buffett loves banks. He has stakes in several major ones including Bank of America (NYSE:BAC) and PNC (NYSE:PNC). But one of the most conservative could be M&T Bank (NYSE:MTB). Buffett has held shares in MTB since 2001.

MTB isn’t a super well-known bank. However, it’s no slouch and is a large regional operator with assets in New York, Maryland, and Pennsylvania, as well as Washington, D.C. This super-regional status of 750 branches focused on some of the nation’s best state economies has allowed M&T to benefit from strong loan demand and a growing deposit base.

The reason why M&T is such a great bank to hold during downturns comes down to its business model. The firm simply doesn’t mess with “risky stuff.” There’s no prop trading like BAC, risky mezzanine loans or subordinated debt on its balance sheet. Just regular, boring banking.

But that has been great for MTB shareholders. Because of this, M&T has been a rock star during recessions. In fact, during the last recession, the firm saw some of the lowest percentage credit losses among its peers. Moreover, it was only one of two banks in the S&P 500 that did not cut its dividend.

Given its history and conservative nature, M&T might be one of the safest stocks in Warren Buffett’s entire portfolio.

Moody’s (MCO)

One of the tenants of almost all Warren Buffett stocks is an irreplaceable moat. That is, a company offers something that no one else does and not many consumers can do without. Moody’s Corporation (NYSE:MCO) is a perfect example of that.

MCO provides credit ratings, research, and risk analysis services for investors, banks and government agencies. Much like your credit score, this rating is a vital component for determining creditworthiness.

In fact, a company can’t issue a bond without a ratings agency giving it the go-ahead. This includes Warren Buffett and Berkshire’s many subsidiaries themselves. And considering that there are only three main ratings agencies around, Moody’s is in a very enviable position.

MCO features relatively low overhead and cost of doing business. This creates a very high-profit margin. In Q1, Moody’s pulled in a whopping $1.3 billion in revenues and managed to score a high 60.5% operating profit margin from these sales.

This high margin alone makes MCO stock worth buying. However, the story could get better for Moody’s if a recession hits. That’s because investors will need to rely on data and risk analysis, even more to help uncover potential problems or values. If a firm wants to raise funds during the downturn, it’ll have to tap MCO whether they like it or not.

Thanks to this moat and need, Moody’s could be one of the best Warren Buffett stocks to own during the recession.

Warren Buffett Stocks to Hold:Coca-Cola (KO)

Of all the stocks in Warren Buffett’s portfolio, Coca-Cola (NYSE:KO) seems like the obvious recession-resistant play. After all, the consumer staple features plenty of steady demand and its products are enjoyed by millions of people each and every day.

I’m drinking a Cherry co*ke right now while writing this. This steadfast nature has served KO through thick and thin. Moreover, it’s rewarded shareholders with 55 years’ worth of dividend increases.

So yes, Coca-Cola is a boring play and has everything you’d want to ride out the recession.

The kicker is, there’s plenty of growth under the hood of KO as well. This comes from new moves into healthier beverages. Times are changing and not everyone wants a surgery soda. As a result, sparkling water, juices, teas, and other healthy drinks are now a priority at co*ke. These items come with some decent margins and now sales for these products account for about half of KO’s total pie.

KO is even getting big into data mining and artificial intelligence. Every time you create a combination on one of its Freestyle machines, pick up a six-pack of juice, you’re creating plenty of user data.

And now, KO has partnered with several tech firms to start digging into that data. This already helped create new flavor combos like Orange Vanilla co*ke as well as provide insight into consumer behavior. It’s an edge that KO can use down the road to keep revenues going, predict trends and ultimately, reward shareholders even during a recession.

All in all, KO has a great combination of boring and exciting attributes.

Globe Life (GL)

Warren Buffett is fanatical about the insurance industry and many firms are top stocks in Berkshire’s portfolio. It’s easy to see why.

Property and casualty insurers collect payments for policies. The beauty is that they don’t have to pay the money back unless there is a claim.

However, insurers don’t just sit on that money. They invest it and this “float” and interest earned on that float can provide plenty of dividends and cash for the insurance firm.

In fact, the reason why Berkshire Hathaway has been so successful is that its insurance operations, like GEICO, provide so much return on their floats. Of these insurance names, Globe Life (NYSE:GL) could be an interesting choice.

Buffett has owned GL shares since 2001 and the insurer has been a good bet. Globe Life is one of the nation’s largest life insurance agencies. The key to that comes from its staggered-rate term policies.

Rather than have the same premium cost for the entire 10 or 20 years, GL policy premiums reset every five years or so as holders move into different age brackets. Moreover, Globe Life also offers many low death-benefit policies versus rivals. This has allowed GL to scale up in size.

It has also allowed Globe Life to be pretty profitable. Q3 continued that trend with EPS jumping more than 17%.

With its long operating history — it’s been in existence since 1900 — long dividend history, and conservative approach to investments, GL could be the sleeper insurance stock in Buffet’s portfolio.

Amazon (AMZN)

Thanks to the insight of many of his lieutenants, Buffett has begun to move into the world of technology. And that includes a stake in one of the best firms around: Amazon (NASDAQ:AMZN).

AMZN continues to be the leader in eCommerce and has used its very profitable cloud-computing assets to help drive its retail operations. This has resulted in lower prices for consumers, faster shipping times, and an overall better experience. And Amazon is not done yet. The firm continues to find new ways of making money from advertising and its own gadgets.

As a result, AMZN throws off a lot of cash. That’s probably what drove Buffett into the stock in the first place.

But as a recession play, AMZN has a lot to offer. When money gets tight, consumers generally trade down to private label brands. Amazon now has hundreds of them that cost less than premium products. Moreover, the ability to take advantage of Amazon’s lower-selling prices overall makes it a powerful money-saving retailer for consumers. On the corporate side, its AWS cloud division continues to offer money-saving tools for business.

In the end, the recession should damper Amazon’s growth potential. That makes it a powerful player in Buffett’s portfolio.

At the time of writing, Aaron Levitt held a long position in AMZN stock.

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.