Investors looking for strategies and guidance on how to outmaneuver a possible U.S. recession are favoring defensive stocks, value over growth, and the methodology of Warren Buffett, reports an article in Bloomberg. Over half of the 352 respondents to Bloomberg’s most recent Markets Live Pulse survey predict that Berkshire Hathaway’s shares will outperform the S&P 500 index over the next 5 years—a hefty boon to the company just before its annual shareholder meeting. And with economists putting a 65% chance that there will be a recession in the next year, Buffett’s legendary value strategies will undoubtedly pay off.
The survey also showed that investors are leaning more towards defensive stocks as they anticipate at least one more rate hike from the Fed this month, rather than the big tech giants that have rebounded this year after plummeting in 2022—a strategy that Buffett would surely approve of given that he’s also likely to avoid those same high-priced tech stocks. Though tech rallied in March, traditional consumer staples gained traction in April, coming in second behind communication services and followed by energy and healthcare, the article reports.
Nearly two-thirds of those surveyed say a 10% Buffett premium is still reflected in Berkshire’s share price, something that is evidenced in the company’s 9.5% compounded annual return over the last 20+ years, well above the S&P 500’s 6.5%. In an effort to bolster those returns, Buffett recently made a highly publicized trip to Japan, touting his investments there. 50% of those surveyed believe Japanese stocks—which offer an attractive yield of 5.8%—will outperform U.S. stocks.
And while 80% of Berkshire investors say that value investing will be Buffett’s greatest legacy, the question of succession is sure to come up at this year’s annual meeting, as well as what the future holds for Berkshire’s massive stockpile of cash. As of last year, the cash reserves totaled $130 billion, and it has yet to be fully deployed, likely because the S&P 500 still has a higher market capitalization relative to the U.S. economy. Buffett and his team are most likely waiting for that ratio to fall significantly before making substantial acquisitions or investments. Though Buffett has admitted that his conglomerate’s size might be a hurdle for its performance, only half of the investors believe so, the article reports.
Meanwhile, 30% of the respondents picked Coke as their favorite Buffett-owned treat, but chose “none of the above” thanks to their general unhealthiness—perhaps the only aspect of Buffett’s legacy that investors disagree with.