Market Crash: The Financial Stocks I'd Buy Without Hesitation

Berkshire Hathaway is holding a $373 billion cash stockpile and has resumed share buybacks under new CEO Greg Abel, with shares down ~11% from their 52-week high and trading at ~1.4x book value. Progressive has fallen >33% from its early-2025 peak of $292 but shows solid underwriting (combined ratio 85% YTD), premiums in force +10% and net premiums earned +8%; P/E ~10 and variable dividends paid $13.50 last year (~7% yield at current price). S&P Global faces AI-related pressure on its software/data business but retains a 50% share of U.S. credit ratings, a 53-year streak of dividend increases, and trades at ~29x trailing and ~22x forward earnings near four-year lows.

Analysis

Berkshire’s newly reactivated buyback program changes the optionality calculus more than the headlines imply: incremental repurchases act as a governor on float volatility and create an asymmetric payoff for patient holders because management can choose between buybacks, bolt-on M&A, or deploying capital into cyclicals. Practically, steady repurchases of even a few percent of float per annum would meaningfully lift EPS growth absent operating improvement, and would absorb concentrated passive outflows during stress — useful to model when stress-test sizing positions vs index reweighting over 3–12 months.

Progressive’s current setup is a classic earnings-quality bifurcation: underwriting discipline that produces sub-90 combined ratios short-circuits margin-of-safety concerns, but premium-growth compression in a hardening market accelerates the importance of reserve adequacy and frequency shifts (e.g., used-car price normalization, EV mix). Expect P&L to be sensitive to loss-cost inflation and reserve development over the next 2–8 quarters; small reserve releases or adverse development can flip a high-yield variable dividend into a meaningful volatility source for total return.

The market’s AI narrative overlooks a clear second-order path: data incumbents with labeled, regulated content and exchange-anchored benchmarks are both exposed to model substitution and uniquely positioned to monetize model aggregation APIs and validation services. That means a bifurcated outcome — multiple compression in the short term from software derating, but durable revenue optionality (pricing power for verified data feeds, governance services) that can restore margin multiple over 12–36 months if management executes on productized AI hooks and pricing governance.

Key Decisions for Investors

• Long BRK.B (12-month horizon): initiate on a 6–12% pullback from current levels or scale in with a DCA over 3 months. Risk: slow capital deployment or an earnings miss could leave buybacks insufficient to support the stock (stop-loss -12%). Reward: buybacks + normal business cash flow imply 20–35% upside if repurchases run ~1–2% of float annually and operating cash flow steadies.
• Long PGR equity + sell short-dated OTM calls (6–12 month covered-call collar): target total return 30–50% over 12–18 months assuming reserve stability and return to mid-cycle pricing; use a protective put or stop at -18% to limit tail loss. Rationale: underwriting strength buys time for multiple rerating if premium growth stabilizes; option income improves yield while capping upside.
• Long SPGI via 12–24 month call spread (buy front-month LEAP call, finance with higher strike call): enter on a <=10% market sell-off in software/indices. Hedge by shorting a software-heavy index ETF (e.g., XLK) for 25–40% notional to isolate re-rating risk. Reward: capture recovery in multiples and monetization of AI services (target 25–40%); risk: durable multiple compression if AI disintermediates core data without offsetting new revenue.
• Tactical hedge: buy small CVX calls (3–6 month tenor) or add OXY exposure as a geopolitical/commodity hedge to BRK and insurance longs — use as directional insurance rather than core position. Risk: oil softening could make this cost a drag; reward: outsized offset to portfolio equity drawdowns should supply-side shocks reaccelerate energy prices.