Some economists predict that a recession is likely to start in 2022. If so, there's probably at least one person who would view it as an opportunity -- Warren Buffett. The multibillionaire chairman and CEO of Berkshire Hathaway (BRK.A -0.39%) (BRK.B -0.56%) has often spoken favorably about buying stocks during periods of uncertainty.
Buffett didn't go on a huge buying spree during the brief recession in 2020 triggered by the start of the coronavirus pandemic. However, the Great Recession that began in late 2007 and extended through mid-2009 was a different story. Let's examine three stocks that he bought heavily during that recession, and consider whether or not they are good picks to buy now.
1. Kraft Heinz
In late 2007, Buffett led Berkshire Hathaway to scoop up shares of Kraft Foods -- years before that company merged with H.J. Heinz to create food products giant Kraft Heinz (KHC 0.43%). And there was a lot of scooping: Kraft immediately became Berkshire's seventh-largest holding. By the end of 2008, it was the conglomerate's fourth-largest holding.
Buffett stated at Berkshire Hathaway's 2008 shareholder meeting that he liked Kraft's strong brands, which he thought would give it a key long-term competitive advantage.
Kraft combined with H.J. Heinz in 2015 to form Kraft Heinz, creating one of the biggest food companies in the world. Berkshire Hathaway owns 26.6% of that company and even includes Kraft Heinz on the website page where it lists links to its subsidiary companies.
2. Becton Dickinson and Co.
Berkshire initiated a position in medical technology company Becton Dickinson and Co. (BDX 0.16%) in 2008. It was a relatively small stake of only 1.2 million shares.
Becton Dickinson fared better than most stocks did during the Great Recession. Its share price didn't fall nearly as much as the S&P 500 did. This relative outperformance was probably because investors (including Buffett) realized that the demand for the company's injection, infusion, and surgery products wouldn't be impacted much by the financial crisis.
While Buffett has stated that his "favorite holding period is forever," he didn't hang onto Becton Dickinson shares very long. By the fourth quarter of 2010, Berkshire Hathaway had completely exited its position in the healthcare stock.
3. NRG Energy
Buffett was a fan of at least one utility stock in the last major recession. In the second quarter of 2008, Berkshire Hathaway bought more than 3.2 million shares of NRG Energy (NRG -0.96%). One year later, the conglomerate had increased the size of that holding to 7.2 million shares.
Some utility stocks went on to perform quite well as the U.S. economy emerged from the recession. Unfortunately for Buffett and Berkshire Hathaway shareholders, NRG Energy wasn't one of them.
Berkshire began selling its shares of NRG in the third quarter of 2009. The company sold its entire remaining stake a year later.
Are they buys now?
Kraft Heinz is handily beating the market so far in 2022. The reasons why Buffett liked the stock more than a decade ago remain applicable. Consumers are still buying Kraft Heinz's food products despite rising prices.
However, my view is that Kraft Heinz isn't likely to outperform the S&P 500 when economic conditions are stronger. Consider that when the economy and stock market were booming in recent years, the S&P 500 trounced Kraft Heinz.
Energy and healthcare appear to be the best sectors to invest in right now. But does that automatically make NRG Energy and Becton Dickinson great picks? No.
The energy stocks that are performing well in the current environment are those connected with the oil and natural gas industry. NRG is an electric utility, and not only has its stock performance lagged well behind that of oil and natural gas players this year, it has also trailed many of its utility peers.
Becton Dickinson might appeal to income investors because of its status as a Dividend King. However, I think there are other healthcare stocks with more attractive dividends -- and definitely other healthcare stocks that should generate significantly higher growth than Becton Dickinson over the next few years.
If another recession does kick off soon, its conditions won't be the same as those that prevailed in the Great Recession. The stocks that Buffett liked then won't necessarily be the same ones he favors now. And they won't be the best alternatives for investors who aren't billionaires to buy, either.
