Worried about a stock market correction? You’re not alone. After a strong run in equities, concerns about valuations and the sustainability of the artificial intelligence boom have made some investors nervous. Nobody knows when the next correction will arrive, but it’s reasonable to think about how your portfolio might hold up if it does.
One stock I’d consider is Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB). The company is worth a closer look for three reasons: It owns a portfolio of established businesses, holds substantial financial resources, and has the flexibility to invest when attractive opportunities arise.
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A collection of businesses built to endure
Berkshire Hathaway is probably one of the most diverse companies in the world. In addition to owning a stock portfolio, it also owns businesses across insurance, railroads, energy, manufacturing, and consumer products.
Its insurance operations include GEICO. It owns BNSF, one of North America’s largest freight railroads, and has substantial energy operations through Berkshire Hathaway Energy. Its other businesses serve customers across a range of industries. This diversity matters because Berkshire doesn’t depend on a single product or industry to generate earnings.
Of course, a recession can hurt many of these businesses. Consumers may spend less, freight shipments can decline, and insurance claims can rise. So Berkshire is not immune to economic weakness. But its value rests on more than investor sentiment. Its operating businesses provide products and services that customers continue to need, even when confidence in the stock market deteriorates.
For investors seeking resilience, that’s a meaningful starting point. Rather than betting on which stocks will remain popular, they can own a collection of businesses with their own earnings sources.
Berkshire Hathaway has substantial financial firepower
Berkshire’s financial resources provide another advantage. At the end of June, it held approximately $359 billion in cash, cash equivalents, and U.S. Treasury bills, net of unsettled purchases.
Why does this matter? When markets fall sharply, some companies face tighter financing conditions or must raise cash to meet their obligations. Berkshire’s substantial liquidity gives it considerable flexibility to navigate difficult conditions without relying heavily on external financing. It also enables Berkshire to pursue opportunities when prices become attractive.
