I hold a diverse portfolio of around 40 stocks at any one time, with varying levels of risk that include both established blue-chip companies and smaller, more speculative investments.
Certainly, the majority of my investment portfolio is structured in a way that shields me from excessive concern during a stock market decline. Among my top 10 holdings, I am highly assured of their stability. businesses They would be perfectly okay if the market declined or if there was a severe economic downturn, regardless of how their stock prices were affected.
With that being mentioned, there is one particular stock that stands out as an excellent choice to have during a market decline, and that is Berkshire Hathaway is a multinational conglomerate holding company headquartered in the United States. ( BRK.A 1.24% ) ( BRK.B 1.40% ) Berkshire’s business is not only resilient enough to withstand severe economic downturns, but it is also structured to come out stronger after facing market declines, corrections, or crashes.
Berkshire’s operations are expected to remain stable regardless of the circumstances.
Berkshire Hathaway’s business comprises of three primary elements: its operating subsidiaries, its cash reserves, and its extensive stock portfolio. These components hold comparable market value and collectively contribute to Berkshire’s attractiveness as an investment, especially during market downturns. Let’s delve into each of them individually.
Initially, Berkshire Hathaway’s operational entities are primarily structured to operate effectively regardless of the stock market or economic conditions. Currently, Berkshire encompasses 67 diverse subsidiaries, with a few susceptible to economic downturns or decreasing consumer trust, but the majority offer essential goods or services that are in demand. . To provide a few instances, during difficult circumstances, it is probable that Geico’s clients will continue to make payments for their car insurance, Berkshire Hathaway Energy will receive payments for electricity usage, and individuals will still visit Pilot Travel Centers to refuel their vehicles.
Great flexibility to make use of
Following that, the most intriguing aspect is Berkshire’s substantial amount of cash reserves. Following significant stock sales in the second quarter, Berkshire currently holds an impressive $277 billion in cash and short-term investments, which holds importance for two key reasons.
Initially, this provides Berkshire with ample reserves in the event of any issues arising with one or more of its subsidiary companies. Should Geico experience losses that exceed expectations, Berkshire is equipped to handle them.
Furthermore, this positions the company with a significant opportunity to benefit from market downturns by investing funds in acquisitions or undervalued stocks. For instance, in the event of a 10% or 20% drop in the stock market, having $277 billion in cash reserves provides a strong advantage to purchase discounted stocks that may experience a future increase in value. Additionally, the majority of the cash is invested in short-term Treasury securities with a 5% yield, resulting in an annual interest income of approximately $14 billion for Berkshire Hathaway.
Investing in a variety of stocks can lead to finding good deals.
Finally, Berkshire Hathaway’s stock holdings were recently reduced slightly, yet they still maintain a market value exceeding $300 billion.
This assortment of investments, carefully selected by Warren Buffett himself, is not only remarkable but also has the potential to offer buying opportunities for long-term investors interested in Berkshire’s stock portfolio.
Put simply, when Berkshire’s investments in stocks decrease in value, the stock price of Berkshire will usually also decrease, which may make it more appealing to investors.
In conclusion, Berkshire’s businesses It will perform well during a market downturn or times of economic instability. Its cash reserves provide the ability to withstand any challenges posed by the economy and also offer the CEO flexibility. Warren Buffett He and his team have the opportunity to shop for stocks at low prices. The company’s stock portfolio can also help Berkshire’s stock become a good deal during a market downturn. This means that Berkshire’s stock is not only the least concerning to me during a market decline, but it is also the one I would be most likely to invest more in.
