Let’s be honest: The market has been extremely difficult so far in 2022. Ytd, the S&P 500 is lower by 7%, and the Nasdaq is down 16%. Plunges like those we’ve seen this year are quite typical, and they’re a normal part of long-term investing’s natural cycle.
When the market is volatile, having some anchor positions in your stock portfolio can be beneficial. Strong, well-established firms will continue to have fluctuations in addition to the rest of the market, but having a few of them may help mitigate the impact of larger market movements. Let’s take a closer look at two businesses that might help you strengthen your stock portfolio.
1. Berkshire Hathaway
When growth equities were soaring to all-time highs through 2020 and early 2021, it was tempting to believe Buffett’s era had passed. Why put money in a “dull” company like Berkshire when there’s parabolic growth in the tech sector?
The answer to that question is now self-evident. Berkshire’s performance compared to the S& P 500 has been exceptional as of this writing, with a 53% rise over the first half of 2020 vs. 42% for the S&P 500.
To be fair, we have the benefit of hindsight. When Berkshire ended 2020 16% behind the S&P 500 for the year, it would’ve been more difficult to predict.
The goal is to show that diversification is critical to any portfolio, and Berkshire’s slow, steady development becomes obvious only after time. In 2021, Buffett’s firm grew earnings by 111%, but keep in mind that this was due to favorable comparisons caused by the severity of 2020 on Buffett’s company. Earnings were still up 10% compared to 2019, which isn’t terrible for a corporation with Berkshire’s scale. Over the previous five years, Berkshire’s profits have grown by almost 300%.
Apple has lost 8% year to date, trailing the S&P 500 by 7%. While this does not appear to be the performance of a resilient firm, it is a relatively small sample size. Apple has been one of the best long-term gainers over the last five years, outperforming both the S&P 500 and its return by more than 280%.
Apple’s recently reported Q1 2022 figures were stellar, demonstrating the company’s dominance in the tech industry. For the quarter, revenue was a record $124 billion, up 11% from the previous year. This expansion came from both its product and service businesses.
The services sector, for example, saw a 24% rise in revenue. This includes high-margin income from Apple’s various subscription services, which suggests the company’s success at monetizing consumers after they’ve bought a hardware device and joined Apple’s ecosystem.
It’s not simply the company’s continuous growth and return record that lead to Apple being a worthwhile investment. With its capital allocation plan, the firm has been extremely shareholder-friendly. In Q1, Apple paid out $3.7 billion in dividends to shareholders and bought back $14 billion worth of shares. Over the previous five years, Apple has bought 22% of its stock outstanding, resulting in an increase in value of each share held by investors of about 22%.