Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) owns dozens of stock positions in its closely followed, $300 billion portfolio. And there are plenty that are trading for significant discounts compared to where they were just a month or two ago. Some look like excellent bargains right now and should be just fine even if inflation and rising rates last longer than expected.
However, the best “Buffett stock” to buy right now might not be any of the stocks in Berkshire’s portfolio. I’d argue that the top Buffett stock to own in uncertain times like these is none other than Berkshire Hathaway itself.
Berkshire’s businesses are built for times like these
Berkshire Hathaway owns more than 60 individual subsidiary businesses, many of which are well-known to consumers in the U.S. and internationally. Just to name some of the most consumer-facing examples, if you have GEICO auto insurance, if you’ve eaten at a Dairy Queen restaurant, or if you have Duracell batteries in any of your electronics, you’re a Berkshire Hathaway customer.
The key point to know is that most of Berkshire’s businesses are rather immune to recessions and inflationary pressures. Consider GEICO, one of the conglomerate’s biggest businesses. People need auto insurance no matter what the economy is doing. The same can be said for Berkshire’s massive utility business. And its BNSF Railroad subsidiary, which is another of the company’s largest revenue drivers, provides shipping services that are essential in all economic climates.
A diverse and well-protected stock portfolio all in one
As mentioned earlier, Berkshire also owns a stock portfolio with a current market value of about $308 billion. There are over 40 stocks in the portfolio, including large stakes in Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), Chevron (NYSE: CVX), and Coca-Cola (NYSE: KO).
To be fair, many of the stocks in Berkshire’s portfolio have declined significantly in the market downturn, which has been a big contributing factor to Berkshire’s own decline. Apple is nearly 30% below its 52-week high, and that’s one of the better performers. But the common denominator among most of the stocks in the portfolio (especially the larger positions) is that they are financially sound and resilient businesses that are well-equipped to make it through tough times.
Tons of dry powder at its disposal
Last, but certainly not least, Berkshire Hathaway has tremendous financial flexibility. Even after deploying more than $50 billion into the stock market in the first quarter of 2022, the conglomerate still had $106 billion in cash on its balance sheet at the end of March. Buffett likes to always keep at least $30 billion in reserves, so this still gives Berkshire $76 billion to work with. Plus, Berkshire’s operating businesses are generating billions in cash flow every quarter that can be redeployed.
This puts Berkshire in an excellent position to capitalize on market downturns. With many stocks trading for steep discounts to their highs, Buffett and his team can choose to take advantage of great businesses at attractive valuations. And if management isn’t impressed with any particular stocks, they can choose to buy back Berkshire’s stock, which is trading for more than 25% below its highs.
I’ve said before that Berkshire’s massive cash hoard could make it the biggest winner of any market crash or correction, and I’d be shocked if Buffett and his team didn’t put billions of dollars to work in the current bear market.
In a nutshell, Berkshire is a great long-term buy, no matter what happens with the economy – and buying shares of the time-tested conglomerate when it has fallen by 25% from recent highs has historically been a very smart move.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® has positions in Bank of America and Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.