History says these two stocks will thrive in the next recession. Here’s why.

Markets are becoming volatile again. But there is no reason why your portfolio needs to participate in this volatility. Even during severe market downturns, there are certain actions that can protect your nest egg.

Are you looking for investments that will insulate your savings from a potential recession, but still want to profit if the markets head higher? These two companies are for you.

Wise investors continue to bet on this market guru

There was almost never a bad time to bet on Warren Buffett. Over the decades, you could have repeatedly bought shares in his holding company, Berkshire Hathaway (BRK.A 0.94%) (BRK.B 0.97%)at the peak of valuation and still made money in the long run. Even if you bought stocks right before a recession, your portfolio would still be way ahead of the competition.

Let’s take a closer look at one of the biggest recessions in US history: the financial crisis of 2008. During that time, financial stocks led the market down. Many major insurance companies and banks went bankrupt or requested emergency loans from the government. Meanwhile, Berkshire shares, OVER THE S&P 500 at a time when most of his peers were performing very poorly.

BRK.B Total Return Level data by YCharts.

It wasn’t a perfect performance. Berkshire’s stock continued to lose value during the worst of the crisis. But the amazing thing is what happened next. From 2010 to 2015, Berkshire’s stock outperformed the S&P 500 by more than 20%. So not only did stocks beat the market during a difficult recession, they outperformed the market once conditions improved.

A major reason for this double outperformance is Berkshire’s ability to maintain profitability in different economic conditions. This allows it to make investments even as competing capital dries up. For example, the company made an investment of 5 billion dollars in Goldman Sachs at the lowest point of the crisis, with incredibly advantageous conditions.

Berkshire’s diversified business model, supported by insurance subsidiaries that generate investable cash throughout each economic cycle, allows it to not only outperform the market during a downturn, but also position itself for success once markets pick up. These factors should prove just as valuable in the next crisis.

Do you like Warren Buffett? Then you will like this stock too.

There is another stock very similar to Berkshire that nervous investors should consider. It is so similar to Berkshire that Warren Buffett started buying shares of this company late last year. In May, it was revealed that Buffett’s secret position was none other than the property and casualty insurer Chubb (CB 1.19%).

Right now, Berkshire’s position in Chubb is worth about $7 billion, and there’s no doubt that Buffett is comfortable holding the stock no matter where the market is. Like Berkshire, Chubb stock outperformed the S&P 500 during the financial crisis, albeit by a slightly smaller margin. However, in the five-year period since the recession, Chubb stock has gained 157% in value. That compares to a 128% gain for Berkshire and just a 105% gain for the S&P 500 over the same time period.

^ SPX data by YCharts.

How can Chubb outperform the market during a downturn and then rebound even more strongly once conditions turn more optimistic? Like Berkshire, the company has a long history of prudent capital allocation. While some insurers like it AIG have outdone themselves with risky financial instruments, Chubb has consistently maintained a much more conservative approach. Return on invested capital, for example, remained positive throughout the financial crisis. Meanwhile, AIGs fell just as low negative 35%

Maintaining consistent profitability has allowed Chubb to invest throughout market cycles. For several years, insurance prices have declined due to increased competition from hedge funds and other large equity funds. While some insurers have struggled to compete, others like Chubb have taken a longer-term approach. For example, Chubb repeatedly made multibillion-dollar acquisitions as other insurers sought to pull out of weak market segments. Now the company is posting record profits. “Our P&C underwriting results for the quarter were simply excellent,” Chubb’s CEO commented after the company posted its best-ever quarterly results last month.

Will Chubb’s stock fall in value if another recession hits? History suggests that this will likely be the case. And with its long-term approach to capital management, however, expect Chubb to take advantage of the next downturn to set the stock up for another multi-year performance.