Warren Buffett Thinks Investors Are "Gambling" and "Playing With Fire" Right Now. But Here Are 3 Safe Stocks Even the Oracle of Omaha Would Like.

Warren Buffett may have retired as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), but the legendary investor is still quite active. While serving as chairman of the Omaha-based holding company, Buffett continues to periodically give interviews to the financial media.

A prime example is back in May, when the Oracle of Omaha lamented the rise of "gambling culture" within the stock market, stating, "We've never had people in a more gambling mood than now." This isn't the first time Buffett has compared short-term speculation to gambling, but these remarks, along with others made in this interview, could provide insight into where markets are headed from here.

In the same interview, Buffett noted that, in such a gambling fever environment, "prices for an awful lot of things will look very silly." While not certain, the current "fast-money culture" could give way to a financial market correction.

With this in mind, it may be time to consider some safe, defensive stocks. Here are three that, while not part of the current Berkshire portfolio, could thrive if today's chancy, speculative market gives way to turbulence: Johnson & Johnson (NYSE: JNJ), PepsiCo (NASDAQ: PEP), and WM (NYSE: WM).

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1. Berkshire used to own defensive healthcare stock Johnson & Johnson

Johnson & Johnson was once a Warren Buffett stock. Berkshire began building a position in the diversified healthcare company back in 2006, holding it for many years, before divesting it in recent years, culminating in a full exit from its position in 2023.

With the stock rising nearly 75% since then, you may think it is overvalued at around $250 per share today, assuming Buffett's $150-per-share sale was based on valuation. However, given success thus far with the company's pivot toward oncology, a faster-growing segment of healthcare, its big run-up appears logical.

Although pricier now than it was in 2023, if J&J's oncology catalyst continues to play out, the resulting earnings growth could help sustain or add to its valuation of around 22 times forward earnings. At the same time, J&J remains one of the highest-quality blue chip dividend stocks. One of the Dividend Kings, or companies that have raised their dividend payouts for at least 50 years, the company has raised its dividend every year for the past 65 years.

The stock currently has a 2% forward yield. Alongside a strong dividend growth track record, Johnson & Johnson also sports a AAA credit rating from S&P Global.

2. PepsiCo rivals a longtime Buffett holding

Coca-Cola, a stock held by Berkshire Hathaway since the 1980s, may be the best known among the Warren Buffett investments. However, PepsiCo's shares have many of the qualities long seen in Coca-Cola's shares.

For instance, PepsiCo has a strong track record of dividend growth. A Dividend King, just like Coca-Cola, the company has raised its dividend yearly for the past 55 years. The consumer staples stock is also a prime example of the types of defensive names that perform strongly during market downturns.

At the same time, PepsiCo may also beat Coca-Cola on fundamental-based investing metrics. The stock trades for only 16.5 times forward earnings, while Coca-Cola trades for over 26.5.

PepsiCo also has a higher forward dividend yield of 4.2%, more than double Coke's 2.4%. Yes, PepsiCo recently hit new 52-week lows as turnaround efforts struggle to counter macro headwinds in the near term. Even so, as those efforts stall, activist investor Elliott Management could further pressure the company to implement sweeping changes, such as selling off underperforming assets.

3. WM's "boring" business is a compelling buy-and-hold

WM, formerly known as Waste Management, may be one of the few companies whose corporate name fully describes what it does. On the surface, it may sound like a dull business, but there are advantages to making this "boring stock" a core holding in both bullish and bearish markets. No matter the macroeconomic backdrop, someone has to take out the trash.

The company has further leveraged the stability of the waste management business by aggressively acquiring other waste management companies. Long-term success with this "rollup" strategy has led to consistent earnings growth.

That said, valuation and yield are two trade-offs with this stock. Shares change hands for around 27 times forward earnings. WM's 1.6% forward yield is also much lower than many of the other blue chip dividend stocks listed previously.

Still, WM has built up a nearly two-decade dividend growth streak. Long-term analyst forecasts call for earnings growth to remain in the upper-single-digit/lower-double-digit range for years to come. This may help sustain WM's premium valuation, with the stock potentially rising in line with earnings growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and S&P Global. The Motley Fool recommends Johnson & Johnson and WM. The Motley Fool has a disclosure policy.