The Best Financial Stock to Hold in Uncertain Times
Key Points
Financial stocks can be highly cyclical.
The economy and interest rates heavily impact the sector.
This company is the best financial stock to own in uncertain times due to its diverse revenue streams and fortress balance sheet.
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Uncertainty feels as high as it has ever been. Investors are constantly questioning whether the economy will be thrust into a recession, whether inflation will reignite, or how many times the Federal Reserve will lower interest rates over the next year.
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All of these questions impact companies in the financial sector, which are highly cyclical, meaning their business tends to fluctuate with the economy. Interest rates significantly impact this group because they affect key components of their business, including funding costs, loan and investment activity, and more.
While every stock is impacted by the macroeconomic environment, this is the best financial stock to hold in times of uncertainty.
A durable, diverse business
Of course, I am referring to Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), one of the world's largest conglomerates, led by the legendary Warren Buffett, who will step down as CEO at the end of the year. Berkshire is the best of the best because it operates many unique yet strong businesses, making it a safe haven in times of duress.
At the core of the business is Berkshire's strong property and casualty insurance business, which generated over $22.6 billion in net earnings in 2024. This business also generates float from insurance premiums that Berkshire can use to fund its massive $300 billion-plus equities portfolio, which is led by some of the world's preeminent investors.
Other businesses at Berkshire Hathaway like the Burlington Northern Santa Fe Railroad and Berkshire Hathaway Energy brought in roughly $5 billion and $3.7 billion of net earnings, respectively, while the conglomerate's manufacturing, servicing, and retailing businesses generated over $13 billion of net earnings in 2024.
Last but not least is Berkshire's fortress balance sheet, which reported over $377 billion of cash and short-term government bonds at the end of the third quarter. Berkshire's diverse revenue streams, fortress balance sheet, and strong management team make it the safest financial stock to hold during uncertain times.
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Bram Berkowitz 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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