Where will the most brilliant investor in the world put his money if the markets collapse? Perhaps into some of the safe harbor stocks he already holds.
As of his last 13D filing, which showed his holdings at the end of the second quarter, Buffett owned some stocks that have had boring but steady performances in recent years but are not parts of market bubble that has grown in the past two years. However, these are stocks in companies that are decades old, in many cases have good yields, a history of solid earnings and iron-clad balance sheets. On the other hand, some have stocks that have performed poorly, but traditionally are stocks people run to in a major sell-off.
Among shares that match these criteria are Costco Wholesale Corp. (NASDAQ: COST), the nation’s most successful big-box retailer. He owns 1% of its shares. Its share rise over the past two years has been a solid 22%, modestly better than the S&P 500. It has a yield of only 1%. However, its earnings track record is far better than rivals Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT). It is also considered a much better managed company than these.
Buffett owns a tiny portion of Johnson & Johnson (NYSE: JNJ). He may increase that in a market sell-off. Johnson & Johnson has had a dominant position in the consumer health products, pharmaceuticals and medical devices markets. The company is among the oldest in America, founded in 1885, and it has a 3% yield. Its revenue has posted a very modest, but consistent growth recently to $74.3 billion last year. Net income also has grown during the period and reached $16.3 billion last year. Johnson & Johnson holds $32 billion in cash and short-term investments. Its performance has been boring over the past two years, as shares have risen only 8%. However, on that basis, it can hardly be considered part of the sharp rise in markets that has inflated valuations.