Even with stocks near all-time highs, the recent pullback has left investors jittery. Small pullbacks are often just a healthy part of an overall longer-term market uptrend. However, they can also be the prologue to a bigger selloff.
So far, it looks more like a normal pullback. For investors who want protection, however, the best strategy may involve buying a great company that’s also sitting on record cash.
That company is Berkshire Hathaway (BRK-B), which is sitting on nearly $190 billion in cash. That’s a healthy level compared to its total market cap.
But more importantly, its operations, led by insurance, allowed profits to soar 39% over the past year. That gives investors a solid combination of safety and potential upside.
Berkshire is up about in-line with the overall stock market in the past year, a notable achievement given its high level of cash.
Action to take: Shares are well valued now at 9 times earnings, and could trend higher thanks to the combination of a high cash balance and operational growth.
Berkshire famously doesn’t pay a dividend, but buying shares following a market pullback should lead to excellent results over time.
For traders, the July $420 calls, last trading for about $4.85, could see mid-double-digit returns or better in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.