Warren Buffett may have retired as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), but the legendary investor is still quite active. While serving as chairman of the Omaha-based holding company, Buffett continues to periodically give interviews to the financial media. A prime example is back in May, when the Oracle of Omaha lamented the rise of "gambling culture" within the stock market, stating, "We've never had people in a more gambling mood than now." This isn't the first time Buffett has compared short-term speculation to gambling, but these remarks, along with others made in this interview, could provide insight into where markets are headed from here.
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Continue » In the same interview, Buffett noted that, in such a gambling fever environment, "prices for an awful lot of things will look very silly." While not certain, the current "fast-money culture" could give way to a financial market correction. With this in mind, it may be time to consider some safe, defensive stocks. Here are three that, while not part of the current Berkshire portfolio, could thrive if today's chancy, speculative market gives way to turbulence: Johnson & Johnson (NYSE: JNJ), PepsiCo (NASDAQ: PEP), and WM (NYSE: WM).
Johnson & Johnson was once a Warren Buffett stock. Berkshire began building a position in the diversified healthcare company back in 2006, holding it for many years, before divesting it in recent years, culminating in a full exit from its position in 2023. With the stock rising nearly 75% since then, you may think it is overvalued at around $250 per share today, assuming Buffett's $150-per-share sale was based on valuation.
However, given success thus far with the company's pivot toward oncology, a faster-growing segment of healthcare, its big run-up appears logical. Although pricier now than it was in 2023, if J&J's oncology catalyst continues to play out, the resulting earnings growth could help sustain or add to its valuation of around 22 times forward earnings. At the same time, J&J remains one of the highest-quality blue chip dividend stocks.
One of the Dividend Kings, or companies that have raised their dividend payouts for at least 50 years, the company has raised its dividend every year for the past 65 years. The stock currently has a 2% forward yield. Alongside a strong dividend growth track record, Johnson & Johnson also sports a AAA credit rating from S&P Global.
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