The stock market has been on a steady rise since the 2022 bear market lows, with major indexes approaching their all-time highs. This positive trend is fueled by expectations of falling interest rates and the continued strength of megacap technology stocks. However, it’s crucial for investors to remember that market crashes are an inevitable part of investing, and it’s only a matter of time before the next one occurs.
Despite the uncertainty surrounding market crashes, there are certain stocks that are better positioned to weather the storm. One such stock is Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), a conglomerate led by legendary investor Warren Buffett. Berkshire Hathaway stands out as a solid investment choice during a market crash due to its diverse portfolio of recession-proof businesses.
Berkshire Hathaway’s business is comprised of three main components: its operating businesses, stock portfolio, and cash reserves. While the stock portfolio may be susceptible to market fluctuations, the company’s operating businesses are well-positioned to withstand economic downturns. Berkshire’s insurance operations, including GEICO, are considered recession-proof as people continue to pay their insurance premiums even during tough times.
Additionally, Berkshire Hathaway Energy, BNSF Railroad, Pilot Travel Centers, and Duracell are examples of businesses within Berkshire’s portfolio that are expected to perform well regardless of market conditions. These businesses provide a stable source of revenue for Berkshire Hathaway, making it a reliable investment choice during uncertain times.
One of the key advantages of investing in Berkshire Hathaway during a market crash is the company’s substantial cash reserves. With $277 billion in cash and short-term investments, Berkshire has the financial flexibility to capitalize on investment opportunities that arise during market downturns. Warren Buffett and his team can use this cash stockpile to purchase undervalued stocks or negotiate favorable deals, strengthening Berkshire’s position in the market.
While Berkshire Hathaway’s stock price may experience volatility during a market crash, its resilient operating businesses and substantial cash reserves set it apart from other large-cap companies. The company has a history of emerging stronger from market downturns, making it a compelling investment choice for long-term investors.
In conclusion, while the timing of the next market crash remains uncertain, owning stocks like Berkshire Hathaway can provide investors with a sense of security and stability during turbulent times. By focusing on companies with recession-resistant businesses and strong financial positions, investors can navigate market crashes with confidence and potentially emerge stronger on the other side.