With the S&P 500 and Nasdaq Composite hitting record highs, many investors are looking to add to their positions, fearing they’ll miss the rally. But before you buy another high-flying tech stock, consider what happens if the bottom falls out.
Because, while I’m not saying it will happen, it wouldn’t be the first time. And with inflation heating up and stretched valuations across the market, it’s a real possibility in the coming year. At a time like this, one of the smartest places you can park $1,000 is Berkshire Hathaway (BRKA +0.95%) (BRKB +1.00%).
Image source: The Motley Fool.
Berkshire’s track record in down markets speaks for itself
Berkshire is built to handle major corrections and even crashes — history proves that.
Take a look at the table. Since 2000, every year the market was down, Berkshire outperformed, often by a large margin.
| Year | Berkshire Hathaway Total Return | S&P 500 Total Return |
|---|---|---|
| 2000 | 26.6% | (9.1%) |
| 2001 | 6.5% | (11.9%) |
| 2002 | (3.8%) | (22.1%) |
| 2008 | (31.8%) | (37%) |
| 2018 | 2.8% | (4.4%) |
| 2022 | 4% | (18.1%) |
| Average | 0.7% | (17.1%) |
Data source: Berkshire Hathaway’s 2024 annual letter to shareholders.
Why Berkshire is built for a downturn
Berkshire has a diversified, cash-generating core business that, while not flashy, protects the company when the market heads south. And its equity portfolio consists of companies that are equally recession-resistant.
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But perhaps most reassuring of all, Berkshire’s nearly $400 billion war chest can — and will — be deployed during a crisis. That means, just as in 2008, the conglomerate will be able to make deals that few companies can and handily beat the market in the years after the crash.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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