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Home builders

The housing crisis is a genuine issue. And Berkshire Hathaway is betting on the solution. Between 2012 and 2022, there were 6.5 million more households created than housing units completed. This gap is one of the key reasons for the housing unaffordability that’s already throttled many American cities and is rapidly spreading to others.

Naturally, this creates intense pressure to build more homes. That’s why Buffett and Munger added stakes in some of the largest homebuilders to his portfolio. During the second quarter of 2023, Berkshire Hathaway added D.R. Horton (DHI) , NVR Inc. (NVR) and Lennar Corp. (LEN), highlighting the fact that even during economic crises, there’s always an opportunity to bet on the remedies.

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Energy prices have been rising again. A barrel of Brent Crude now trades at $93 and JPMorgan expects it to reach $120. Berkshire has been accumulating shares of oil and gas producers for several quarters. Now, Chevron Corp (CVX) and Occidental Petroleum (OXY) are the fifth and sixth largest holdings in the Berkshire portfolio, respectively.

Energy companies are underrated and undervalued at the moment, given their cash flows. Occidental, for instance, trades at a price-to-free-cash-flow ratio of 7.2. These stocks are cheap, which perfectly fits Buffett and Munger’s strategy.

Health care

Health care spending is untethered to the economy. During the Great Recession of 2008, the number of visits to hospitals and purchases of pharmaceuticals didn’t drop. In the most recent crisis, health care spending actually surged because we were dealing with a pandemic. This phenomenon has led some academics to label hospitals and pharmaceutical companies “recession-proof.”

Buffett and Munger could be aware of this fact. Dialysis provider Davita Inc. (DVA) is one of Berkshire’s top holdings. Johnson & Johnson (JNJ) is on the list too.

More: Should you invest in health care stocks?

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About the Author

Vishesh Raisinghani

Vishesh Raisinghani

Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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