CA - Berkshire Hathaway: Hedge Against Recession With Its Diversified Business
2024-06-20 07:53:10 ET
Summary
- Berkshire Hathaway stock is the author's perfect hedge for a recession or tough economic times.
- BRK has a history of stable earnings growth, wise investments, and great management, making it an anti-fragile stock.
- BRK tends to outperform the market during times of financial stress due to its diversified business, strong balance sheet, and capable management.
- Warren Buffett's investment strategy with BRK has shown to be successful during economic downturns, making it a safe haven for investors looking to hedge their portfolios.
Investment Thesis
Berkshire Hathaway ( BRK.A ) ( BRK.B ) has a history of stable earnings growth, wise investments, and great management. Its track record of outperforming SPY during times of financial stress and over long periods of time is a testament to its anti-fragility and is why I believe the stock will continue to outperform the market. For these reasons, I believe BRK is the perfect equity portfolio hedge for stock investors.
Anti-fragile Investing And Berkshire
With the economy showing the potential for stressful times, I am becoming more attracted to investing in anti-fragile businesses. I was turned on to this idea by one of my investing mentors, Brian Stoffel. Brian has an incredible track record of outperforming the S&P 500, but he and I take different approaches to investing. The idea of anti-fragile businesses is a common trait in what we are looking for in our stocks. Brian defines anti-fragile businesses as companies that can not only withstand chaos and hard times but also benefit and grow stronger from them. His three types of companies are robust ones that remain unchanged by chaos, while fragile ones break under the stress of chaotic times and disruption. Anti-fragile businesses thrive off or amid chaos. Competitive advantages and optionality are critical components for anti-fragile companies. His investments are mainly in Tech stocks, where adaptation and innovation are paramount to performing. I take more of a barbell approach with my investing. On one end of the barbell, I invest in AI stocks to capture upside potential. On the other end of the barbell, I invest in stalwart companies that I believe will mitigate downturns and solidify the core of my portfolio and ensure that a high-growth stock blow-up doesn’t keep me up at night. I also hold at least 5% to 10% cash to ensure I have money to spend at opportune times....
Berkshire Hathaway: Hedge Against Recession With Its Diversified Business