Investors Are Addicted to Risk. Berkshire Hathaway and Microsoft Stock Are the Antidotes.

Microsoft stock (Photographer: Adam Gray/Bloomberg)

Key Points

• Investors are increasingly buying high-volatility stocks to recover losses after missing the market’s rebound from an April downturn.
• J.P. Morgan strategist Dubravko Lakos-Bujas warns that crowding in high-volatility trades could lead to a rapid selloff.
• Lakos-Bujas suggests protecting investments with highly traded, low-volatility stocks such as Microsoft, Walmart, Waste Management, and Berkshire Hathaway.

Investors have been piling into risky stocks, trying to keep up with the market’s torrid pace of gains. Owning blue chips like Berkshire Hathaway , Microsoft , and Walmart is one way for investors to protect themselves against the inevitable blowback.

It’s been a bang-up year for the stock market with the S&P 500 returning more than 16%. But it hasn’t been all smooth sailing. In April, tariff war fears sent the stock market briefly plunging nearly 19%, before equities regained their upward momentum.

The short-lived sell off posed problems for many institutional investors who sold shares near the bottom, then missed the snapback, according to a note Thursday by J.P. Morgan equity strategist Dubravko Lakos-Bujas.

Those April missteps had reverberations that are shaping the market today, Lakos-Bujas argues. Lately, many of those same investors have been piling into high-volatility stocks—whose daily moves magnify the broader market’s moves—in an attempt to make up lost ground and catch up with the benchmark’s year-to-date returns.

With so many investors piling in, the high-volatility trade is exhibiting signs of “crowding.” That suggests the easy money has already been made and raises the troubling prospect that any small reversal could turn into something like a stampede—if investors all rush to exit at once.

Lakos-Bujas suggests investors protect themselves with low-volatility stocks that are also highly traded, making them easily buy and sell even in a rocky market. He offers four names: Microsoft, Walmart, Waste Management, and Berkshire Hathaway.

While those top-shelf names certainly hold appeal, they aren’t without risk. Berkshire Hathaway, up a workmanlike 12% in 2025, is in the midst of its biggest transition in more than 50 years: CEO Warren Buffett is poised to hand the reins to successor Greg Abel at year end.

In his latest Thanksgiving letter, Buffett nonetheless extolled Berkshire’s stability.

“In aggregate, Berkshire’s businesses have moderately better-than-average prospects, led by a few noncorrelated and sizable gems,” he wrote. “However, a decade or two from now, there will be many companies that have done better than Berkshire; our size takes its toll.”

The stock trades at 24 times earnings, just above S&P 500’s average of 23 times.

While many consumer staples stocks have struggled this year, Walmart has returned 14%. The retail giant, which attracts price-conscious spenders especially in tough economic times, raised its fiscal-year outlook in August, following its latest earnings report. Still, at nearly 36 times earnings, the shares aren’t cheap.

Microsoft has returned 21%, boosted by the excitement over artificial intelligence that is also driving the overall market. Wall Street is so impressed with the stock that, as of late October, every single of the 62 analysts that follow the stock rated it a buy, according to FactSet. Still, like other tech stocks, it is richly valued at 30 times earnings.

Shares of Waste Management have struggled in 2025, returning just 3.5%. The company reported disappointing sales and earnings last quarter, thanks in part to soft prices for recycled commodities. At 25 times earnings, the shares aren’t particularly cheap. Still, Wall Street is somewhat bullish. About two-thirds of analysts that cover the stock rate the shares Buy. Analysts’ average price target calls for 20% upside, according to FactSet.

Write to Ian Salisbury at ian.salisbury@barrons.com