When will the next bear market be? It’s impossible to say for sure, but it’s never too early to start preparing for a market crash. Investors need not fear downturns too much. With the right strategy, it’s possible to emerge from them more or less in one piece. And if there is one on the way, investors may want to consider putting their money in one particular stock that is a favorite of Warren Buffett: Berkshire Hathaway (NYSE:BRKA) (NYSE:BRKB).
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Buffett has bought back billions worth of Berkshire stock in recent years
How do we know that Berkshire Hathaway is one of Buffett’s favorite stocks, aside from the fact that it is the company he led as CEO for decades? Consider that between 2020 and 2024, Buffett oversaw a multi-billion-dollar share repurchase program at Berkshire Hathaway. The company then took a break, but share buybacks are back in style at Berkshire. During the second quarter, and under Greg Abel’s leadership (likely in consultation with Buffett), the conglomerate bought back roughly $4.5 billion of its own stock.
What does this indicate? Buying back shares makes the most sense as a corporate capital allocation strategy when a company is trading below its intrinsic value, and part of Buffett’s investment philosophy is precisely to invest in companies that are trading at a bargain, below what they are actually worth. The Oracle of Omaha’s track record proves that he is at least pretty good at figuring out when a company’s share price is too low.
So, Berkshire’s massive buybacks in recent years suggest that Buffett and his team have determined that Berkshire Hathaway stock, the one company they are arguably in the best position to evaluate, is undervalued. Of course, Buffett can be wrong, but this should, at least, cause retail investors looking for bargains to take a second look at Berkshire Hathaway.
The perks of owning Berkshire Hathaway stock
There are several reasons Berkshire Hathaway is a great stock to own during a market crash, especially if a recession triggers it. First, the company has a diversified business. Berkshire owns dozens of subsidiaries across many different sectors and industries. Some may not perform well during economic downturns, but others will do slightly better. That doesn’t mean Berkshire can go through a recession and emerge essentially unscathed. But the company’s business looks resilient.
