If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the world.

The May consumer price index came at 8.6% on an annual basis, the highest reading since 1981 and way above estimates. Mortgage rates are the highest since 2009, which at 5.78% for a 30-year fixed is still historically low, but that rate was 2.95% just last fall. In addition, new mortgage applications last week came in at the lowest number in 22 years. Gasoline prices are at all-time highs, and prices at the grocery store have jumped.

Worried investors should shift away from high-beta stocks and go into conservative dividend-paying companies to ride out what may be the worst year in the stock market since 2008 to 2009. We screened Warren Buffett’s Berkshire Hathaway portfolio looking for quality defensive names that make sense now and found 5 top companies that are all rated Buy by major Wall Street firms, and can likely avoid the devastating inflation effects.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Bank of New York Mellon

Founded in 1784, this is the oldest company in the Fortune 500, and its stock is offering an incredible entry point for long-term investors. Bank of New York Mellon Corp. (NYSE: BK) provides a range of financial products and services in the United States and internationally. The company operates through the following three segments.

The Investment Service segment offers custody, trust and depositary, accounting, exchange-traded funds services, middle-office solutions, transfer agency, services for private equity and real estate funds, foreign exchange, securities lending, liquidity/lending services, brokerage and data analytics, clearing, investment, wealth and retirement solutions, technology and enterprise data management, trading, corporate trust, depositary receipts, payments, foreign exchange, liquidity management, receivables processing and payables management, trade finance and processing, collateral management and tri-party services.

The Investment and Wealth Management segment provides diversified investment management strategies and distribution of investment products, investment management, custody, wealth and estate planning, private banking, investment and information management services.

The Other segment engages in the leasing, corporate treasury, derivative and other trading, corporate and bank-owned life insurance, renewable energy investment and business exit activities. It serves central banks and sovereigns, financial institutions, asset managers, insurance companies, corporations, local authorities and high net-worth individuals and family offices.

Shareholders receive a 3.18% dividend. Barclays has a $68 price target on Bank of New York Mellon stock. The consensus target is just $53.97, but Monday’s last trade came in at $41.47.

Typically, insurance companies are not affected by increases in interest rates, and this is one of the strongest companies in the industry. Marsh & McLennan Companies Inc. (NYSE: MMC), a professional services company, provides advice and solutions to clients in the areas of risk, strategy and people worldwide.

Its Risk and Insurance Services segment offers risk management services, such as risk advice, risk transfer and risk control and mitigation solutions, as well as insurance and reinsurance broking, catastrophe and financial modeling, and related advisory services, and insurance program management services. This segment serves businesses, public entities, insurance companies, associations, professional services organizations and private clients.

The Consulting segment provides health, wealth, and career consulting services and products. It also offers specialized management, as well as economic and brand consulting services.

Shareholders receive a 1.43% dividend. The Wells Fargo target price of $183 is in line with the $183.08 consensus target. Marsh & McLennan stock closed on Monday at $147.31.

Merck

This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) operates as a health care company worldwide. It operates through the following two segments.

The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular and diabetes, as well as vaccine products, such as preventive pediatric, adolescent and adult vaccines.

The Animal Health segment discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as digitally connected identification, traceability and monitoring products.

Merck serves drug wholesalers and retailers, hospitals and government agencies; managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions; and physicians and physician distributors, veterinarians and animal producers. The company has collaborations with AstraZeneca, Bayer, Eisai, Ridgeback Biotherapeutics and Gilead Sciences.

Merck stock investors receive a 3.08% dividend. The $105 Goldman Sachs target price is well above the $97.35 consensus target, and the stock is on the firm’s Conviction List of top picks. Monday’s closing print was $85.00.

Moody’s

While not one of Warren Buffett’s more well-known stocks, the company should have limited issues from rising inflation. Moody’s Corp. (NYSE: MCO) operates as an integrated risk assessment firm worldwide.
The Moody’s Investors Service segment publishes credit ratings and provides assessment services on various debt obligations, programs and facilities and entities that issue such obligations, such as various corporate, financial institution and governmental obligations, as well as and structured finance securities. This segment provides ratings in approximately 140 countries. Its ratings are disseminated through press releases to the public through electronic media, including the internet and real-time information systems used by securities traders and investors. This segment has rated approximately 5,000 non-financial corporates; 3,600 financial institutions; 16,000 public finance issuers; 145 sovereigns; 47 supranational institutions; 459 sub-sovereigns; and 1,000 infrastructure and project finance issuers, as well as 9,100 structured finance deals.

The Moody’s Analytics segment develops a range of products and services that support the risk management activities of institutional participants in financial markets, and it offers subscription-based research, data and analytical products comprising credit ratings, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, commercial real estate data and analytical tools, and on-line and classroom-based training services, as well as credentialing and certification services.

Moody’s also offers offshore analytical and research services with learning solutions and certification programs, and software solutions, as well as related risk management services.

Investors receive a 1.02% dividend. RBC Capital Markets has set a $329 target price, while the consensus target for Moody’s stock is $321.60. The stock closed at $265.35 on Monday.

Verizon

This top telecommunications stock offers tremendous value at current levels, and Berkshire Hathaway owns 158.8 million shares. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.

The company’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Its wireline business has undergone a period of secular decline due to wireless substitution and cable competition.

Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Verizon Communications stock comes with a 5.04% dividend. The BofA Securities target price is $64. The consensus target is $58.61. Shares closed Monday’s session trading at $49.59.

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Given Buffet’s proclivity for only owning the stock of companies that he understands inside and out, these all make sense now for growth and income investors worried about the potential for a steep market decline. While they could sell off in a large correction, they will hold up far better than most, and they are less likely to be stung by higher interest rates.

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