By
Steve Muchoki
April 16th, 2024
While some stocks are seriously falling being affected by the current events in the world, Berkshire Hathaway stock may be the biggest winner.
Berkshire Hathaway (NYSE: BRK.A, BRK.B) stock may be the biggest winner of the current stock market crash caused by the coronavirus outbreak and also the crude oil recession. There are some reasons why the company is well-positioned to handle the current market meltdown with ease.
However, at the moment BRK.A and BRK.B are falling by 6%. But BRK.B is adding 2% in the premarket.
Coronavirus outbreak has been the number one cause of the stock market bleeding out in a huge percentage since the beginning of this year. Basing the argument on the benchmark S&P 500, which consists stock market from over 500 largest companies worldwide by valuation, the huge nosedive on the market chart represents the investor fear to stay away from the risky and volatile market at this time of heal crisis.
As a result of the coronavirus outbreak worldwide, the crude oil demand has sharply declined while the supply from the OPEC big fish remains constant if not increasing. It has, in turn, reduced the prices of one barrel of oil, which was the origin of contention during the recent OPEC-Russia meeting.
With Russia comfortable with low prices, Saudi Arabia and the rest are pushing for a cut in the daily supply to stabilize the prices. In a chain of reaction, solar energy and electric automakers’ stocks become less attractive to investors, hence a nosedive in their stock market.
Berkshire Hathaway to Survive in Coronavirus and Oil Market Crash
Berkshire Hathaway is an insurance company, however, it has over 60 other businesses attached to it. The businesses include consumer goods, manufacturing, home building, energy production, railroads and many more. The huge diversity in the market has been a significant shield to its stock price from falling like the rest of the stock markets.
Headed by CEO Warren Buffett, an American billionaire investor, the company is ever in search of businesses with durable competitive advantages to investing in. This kind of mindset has put the company ahead of the current crisis, as the product offered is still needed and usable by the general public without a glitch.
One of the major investment include Berkshire Hathaway Energy which supplies the much-needed electricity even at this time when coronavirus is affecting it. Actually, the business which uses oil to produce electricity is benefiting from cheap oil.
Warren Buffett always pushes his business to thrive at the time of economic and other global crises. In the 2007 economic crisis, the company invested in the Bank of America which in turn made billions in profit. However, since then, Berkshire Hathaway has not made other reasonable investments, resulting in the accumulation of billions in cash profits.
Using Buffett’s investment analogy, ‘Be fearful when others are greedy and be greedy when others are fearful’, it might be the opportune time for his company to find an investment to make. Who knows, maybe it might be the cryptocurrency which Buffett has always had beef on.
Despite a decline in the stock price at the time of writing, all these reasons make Berkshire Hathaway a favorable business for investors and reason for its stock market to thrive.