There is arguably no one being watched closer than Warren Buffett and Berkshire Hathaway shares. Whenever there is any movement at all in share price, buying or selling, analysts are ready to pounce on what that means. So of course, when that happened last month, analysts were again there to dissect.
It’s no wonder. Buffett was quiet for months when the market crash happened and then we saw a flurry of action. Buffett’s fund started selling and buying things it would never have considered in the past. But there’s likely still more action to come. In fact, it looks like Buffett is expecting two industries in particular to crash first when the market crash hits in the next few months.
First crash: bank stocks
Banks had been making a comeback over the summer, with a rebound looking to be underway. Clients were starting to pay down debt, and it looked like things were returning to normal. That’s especially as the banks were already prepared for a market crash, though of course not for a pandemic.
And there’s the rub. The bank had prepared to a similar situation back in the Great Recession, if not slightly better. Now we have a pandemic. It’s unpredictable, making an incredibly volatile market. The first thing people will do when they need to save money is put loans aside, that goes for individuals and businesses. So when there’s a market crash, it’s likely only going to get worse for bank stocks.
This is likely why Warren Buffett recently sold off stakes in several banks and financial houses. So if you’re wanting to take his lead, it might be time to consider selling at least part of your stake, taking the profits, and waiting for the crash to buy back shares if you need the cash on hand.
Second crash: gold
Warren Buffett surprised everyone by buying shares in Barrick Gold Corp. (TSX:ABX)(NYSE:GOLD) a few months ago. The investor had long stated that gold was a poor investment, it didn’t help the economy. It was just a bet against the economy’s recovery to keep you stable. Yet analysts argued his investment managers convinced him at least buying up a mine instead of gold itself was still helping the economy recover.
But Berkshire Hathaway sold off 42% of its stake in Barrick. It looks like there’s a simple reason for this: profits! Gold soared in the last few months, and shares in Barrick soared after the Berkshire buy. So it looks like the fund was looking to take its profits, and potentially buy more during the next market downturn.
What to buy?
Healthcare. This is where Warren Buffett sees the future of at least short-term investment, and he’s likely right. There are going to be more ways to get healthcare to the people that need it, ideally at home. So that’s where investors should be focusing their efforts.
The future of healthcare can be seen with a stock like CloudMD Software & Services Inc. (TSXV:DOC). The company provides virtual healthcare options across the country, from mental health support to basic questions of physicians and nurses. The company has been growing through acquisition lately, and shares have soared by 686% this year alone!
Yet the stock is still crazy cheap, making it a solid defensive stock for the next market crash. While it’ll still be a ways off for the company to make a substantial profit, expect revenue and shares to continue making large gains in the mean time.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.