With the election cycle heating up, investors must consider how they’re positioned. A load of growth stocks in one’s portfolio can be great during bull markets. But with recession risks picking up, now may be the time for a rotation into more defensive names.
Indeed, we’re already seeing quite the rotation build in the market. Some top mega-cap tech stocks have declined considerably from their peaks, with others in the Russell 2000 seeing outsized gains. Even within the large-cap grouping, more defensively positioned companies appear to be doing better, as investors increasingly look for companies with solid balance sheets and cash flow growth over top-line revenue growth.
In that regard, the following three buy-and-hold stocks present unique opportunities right now. I think these could be among the best companies for long-term investors to consider increasing exposure to in this current market.
Restaurant Brands (QSR)
As one of the best defensive and dividend stock to own if the market crashes is Restaurant Brands (NYSE:QSR). Holding a portfolio of some of the most well-known fast food chains in the world, the company aims to expand to a footprint of 40,000 locations that can generate over $60 billion in revenue. Tim Horton’s menu is enhancing daytime offerings and adding cold beverages, and the company’s Burger King franchise is picking up steam.
Restaurant Brands has continued its long-term focus on global expansion with high-quality brands, seeing significant growth in emerging markets. Burger King will open more branches in Latin America and Asia, while Tim Hortons is doing well globally. After posting excellent revenue numbers and earnings per share, Restaurant Brands’ strong fundamentals position the company as a top defensive option in this current environment.
Given various trade-down effects that could take place, I think this company’s long-term growth profile remains robust no matter an investor’s outlook. With a 3.4% dividend yield, there’s a lot to like about QSR stock from an income standpoint as well.
Berkshire Hathaway (BRK-B)
Rising 24% year-to-date and surpassing most sector averages, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is another stock to own for investors seeking stability and long-term gains. The company has over 90 subsidiaries, thriving on diverse earnings after interest, depreciation, and tabes. Its property and casualty insurance business, one of the largest in the world, yields an incredible return on equity, boosting the company’s overall return on equity to to 13.6%.
In the first quarter, Berkshire’s insurance business brought in $168 billion in revenue, indicating that strong investment opportunities remain. The company also earned $11.2 billion in realized gains. In addition to that, a $2.4 billion gain from Pilot Travel Centers was also reported.
By all accounts, Berkshire’s portfolio companies continue to perform well. Over the long term, I expect these results to continue. Of course, there is some cyclicality to Warren Buffett’s long-term investing portfolio. However, for investors to follow in the footsteps of one of the greatest investors to have ever lived, making large bets on America continues to pay off.
PepsiCo (PEP)
Due to its strong consumer branding, PepsiCo’s (NYSE:PEP) can manage any economic downturns better than its peers and rivals in the beverage sector. Pepsi can benefit as consumers shift from dining out to grocery shopping. Recent financials show Pepsi consistently outperformed in earnings expectations, with its stock now trading at relatively attractive multiples compared to its historic range.
The company’s focus on sustainability is one of the more prescient recent catalysts that could drive more eyeballs to Pepsi. PepsiCo Foods North America recently launched the Planting Pathways Initiative, a program aimed at boosting young people’s opportunities in agriculture. The program partners with Practical Farmers of Iowa and the Farm Foundation, aiming to provide farm and industry job pathways. This initiative aligns with PepsiCo Positive, the company’s 2021 plan for sustainable supply chain and social progress.
With a world-class beverage and snack brand portfolio, there’s much to like about how Pepsi is positioned for a future where most consumers will still reach for the affordable treat. This company’s long-term growth trajectory and its 3.1% dividend yield look attractive for those looking to create portfolio stability.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
