This Cheap Warren Buffett Stock Should Be Your Top Pick Right Now
Berkshire Hathaway (BRK.A 1.15%)(BRK.B 1.38%) holds dozens of equity positions in its closely watched $300 billion portfolio. And there are plenty trading for deep discounts from where they were just a month or two ago. Some look like great 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 one of the stocks in Berkshire’s portfolio. I would say the best Buffett stock to own in uncertain times like these is none other than Berkshire Hathaway itself.
Berkshire businesses are built for times like these
Berkshire Hathaway has more than 60 individual subsidiaries, many of which are well known to consumers in the United States and around the world. To name just a few of the most interesting examples for consumers, if you have GEICO car insurance, if you have eaten at a Dairy Queen restaurant, or if you have Duracell batteries in one of your electronic devices, you are a Berkshire Hathaway customer.
The key point to know is that most Berkshire businesses are fairly immune to recessions and inflationary pressures. Consider GEICO, one of the largest companies in the conglomerate. People need auto insurance no matter what the economy does. The same can be said for Berkshire’s huge utility company. And its subsidiary BNSF Railroad, which is another of the company’s main sources of revenue, provides shipping services that are essential in all economic climates.
A diversified and well-protected equity portfolio all in one
As mentioned earlier, Berkshire also has an equity portfolio with a current market value of around $308 billion. There are over 40 stocks in the portfolio, including significant holdings in Apple (AAPL 3.28%), Bank of America (BAC 2.91%), Chevron (CLC 4.18%)and Coca Cola (KO 2.14%).
To be fair, many stocks in Berkshire’s portfolio declined significantly during the market downturn, which was a major contributor to Berkshire’s decline. Apple is nearly 30% below its 52-week high, and it’s one of the better performers. But the common denominator of most stocks in the portfolio (especially the larger positions) is that they are financially strong and resilient companies, well equipped to weather tough times.
Tons of dry powder at his disposal
Last, but not least, Berkshire Hathaway has tremendous financial flexibility. Even after deploying more than $50 billion to the stock market in the first quarter of 2022, the conglomerate still had $106 billion of cash on its balance sheet at the end of March. Buffett still likes to keep at least $30 billion in reserves, which still gives Berkshire $76 billion to work with. Additionally, Berkshire’s operating activities generate billions in cash flow every quarter that can be redeployed.
This places Berkshire in a excellent position to take advantage of market downturns. With many stocks trading for deep discounts to their highs, Buffett and his team can choose to take advantage of big companies at attractive valuations. And if management isn’t impressed with particular stocks, it may choose to buy back Berkshire shares, which are trading more than 25% below their highs.
I’ve said before that Berkshire’s huge cash reserve could make it the biggest winner in any market crash or correction, and I’d be shocked if Buffett and his team didn’t invest billions of dollars in the bear market. current.
In a nutshell, Berkshire is a great long-term buy no matter what’s going on with the economy – and buying shares of the time-tested conglomerate when it fell 25% from recent highs has always been a very smart move.