Three shares belonging to Jeremy Grantham serve as a safeguard during economic recessions
Loosen Up: Let's Talk Bears, Market, and Money
Bear markets ain't quite over yet, warns British billionaire and asset manager, Jeremy Grantham. The 83-year-old investment whiz - known for his killer predictions, like the dotcom bubble burst and 2008 financial crash - recently had a candid chat on the "We Study Billionaires" podcast. Grantham couldn't hide his puzzlement about the abrupt end to the bear market, as it reached such lofty heights, and he's got a point. Despite the bloodbath in indices, we didn't see any widespread panic selling in the first half of the year. Most of the losses were acceptably minimal for large firms and indices.
Grantham's got a forecast for a 50% market drop originating from the S&P 500's peak in the upcoming months. So what should we featherheads do? If you're convinced by Grantham's take on the market's future, you can check out his gutsy investment moves at GMO to safeguard his hefty wealth from an impending crash. According to MoneyWise, these three stocks in his portfolio could offer solid protection:
Johnson & Johnson
This U.S. pharmaceutical behemoth is one of the most resilient dudes in the sector, thanks to its gigantic size, cash reserves, and an extensive network of subsidiaries. It's not just muscle; it's brain, too. Johnson & Johnson is a money-making machine that consistently cranks out bigger profits each and every year, earning a spot in every pharmacy on the planet. Plus, it's a member of the dividend aristocrats, currently shelling out 2.7% of its shareholders' cash. Got a keen eye for investments? You'll notice that Johnson & Johnson's stock has held up like a champ during the last few tumultuous months. While the broader market indices plunged into a bear market, Johnson & Johnson barely took a hit, losing just five percent.
US Bancorp
Banks are the happy campers during tough economic times, and US Bancorp - the daddy of U.S. Bank – is no exception. Yeah, banks have had their moments, like when interest rates were at rock bottom, but now that the interest rates are soaring, they're raking in the dough. Banks collect more profit from credit and credit card businesses at increased interest rates.
Coca-Cola
Now, let's talk about this value stock heavyweight, Coca-Cola. War defined as a popular favorite by none other than the Sage of Omaha, Buffett, and a leader in the consumer staples sector. Coca-Cola has a globally known brand portfolio and a strong grip on the market, especially in the water business. Earnings from this defensive stock give investors a 2.8% payday. Such stocks can make it easier for investors to stay afloat in unpredictable markets, as they often outperform in a deep red market.
Grantham doesn't specifically recommend these three stocks as crash-proof safeguards for wealth. But his investment philosophy is all about seeking long-term strategies, avoiding overpaid assets, and buying high-quality companies at fair prices. Here are a few lessons we can learn from Grantham:
- Quality over Quantity: Focus on top-notch companies in sectors like healthcare, which perform well during tumultuous markets.
- Beware the Overhyped: Keep a watchful eye out for overvalued stocks and potentially avoid them.
- Find the Undervalued: Be open to considering contrarian opportunities in undervalued or overlooked sectors, like artificial intelligence, for example.
Ponder these principles as you make your investment decisions, but be sure to do thorough research and consider your personal financial aims before diving into any specific shares.
- Despite Jeremy Grantham's warning of a potential 50% market drop, Johnson & Johnson, a resilient pharmaceutical giant, has held up well during the recent bear market, losing only five percent.
- In contrast to the market downturn, banks, such as US Bancorp, tend to thrive during tough economic times due to their profitability from credit and credit card businesses at higher interest rates.
- Coca-Cola, a value stock favorite of Warren Buffett and a leader in the consumer staples sector, can provide investors with a steady income through its 2.8% dividend yield and has the potential to outperform in a deep red market.
- Adopting Jeremy Grantham's investment philosophy, investors might seek long-term strategies, avoid overpaid assets, and buy high-quality companies like Johnson & Johnson, US Bancorp, and Coca-Cola at fair prices, as he suggests focusing on quality over quantity and being open to undervalued sectors like artificial intelligence.
