Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), the conglomerate led by billionaire investor Warren Buffett, actually has some cash to take a position. On the finish of the second quarter, Berkshire had greater than $146 billion of cash and equivalents on its stability sheet — even when you think about Buffett likes to maintain at the very least $20 billion available, that is a ton of shopping for energy.
What’s extra, it seems to be just like the Oracle of Omaha would possibly lastly be prepared to begin placing cash to work. To this point within the third quarter, Berkshire has accomplished a $10 billion (together with debt) acquisition of pure gasoline belongings so as to add to its vitality enterprise, and has invested greater than $2 billion to extend its Bank of America (NYSE:BAC) stake.
And whereas we do not know what stocks Buffett and his stock-pickers is likely to be contemplating, two stocks that may very well be wonderful additions to Berkshire Hathaway’s portfolio are Realty Earnings (NYSE:O) and Lemonade (NYSE:LMND).
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Bulletproof earnings and a time-tested model
Realty Earnings is an actual property funding belief, or REIT, that primarily owns single-tenant net-leased properties leased to retail tenants.
Whereas the phrase “retail” would possibly understandably provide you with reservations, Realty Earnings invests in the correct of retail. Particularly, the corporate’s tenants function three various kinds of companies:
Low cost-oriented retail. Assume greenback shops and warehouse golf equipment. These companies are recession-resistant and are additionally much less susceptible to e-commerce disruption than most different varieties of retail.
Service-based retail. Auto service facilities and well being golf equipment are two examples. Whereas the COVID-19 pandemic hasn’t precisely been a constructive catalyst for most of these retail, they need to be simply nice long-term as they’re proof against e-commerce headwinds.
Non-discretionary retail. Within the pandemic, companies that promote issues individuals want have achieved fairly effectively. And these companies (suppose drug shops and comfort shops) additionally do effectively it doesn’t matter what the financial system is doing.
As well as, tenants are on long-term leases with gradual hire will increase in-built. We already know Buffett likes this enterprise model, as fellow net-lease retail REIT STORE Capital (NYSE:STOR) is in Berkshire’s portfolio. And since Realty Earnings is a number of instances the dimensions of STORE, it may very well be a good way for Berkshire to deploy a few of its capital.
The way forward for Buffett’s favourite enterprise
It is no secret that Buffett is an enormous fan of the insurance coverage enterprise. GEICO and Berkshire’s reinsurance operations are the spine of your complete conglomerate. So whereas recent-IPO insurance coverage firm Lemonade might sound a bit too high-tech or speculative for Buffett, I am not so certain.
Lemonade’s enterprise model is to leverage trendy expertise to make the insurance-buying course of as fast and straightforward as doable, in addition to inexpensive. Via its synthetic intelligence-powered platform, Lemonade permits clients to get quotes in only a couple minutes and file claims rapidly and simply.
It is also worth mentioning that Berkshire hasn’t been afraid so as to add some up-and-comers in industries that Buffett loves. To call a current instance, Buffett has been a significant fan of cost processing for a while, with investments in American Categorical, Visa, and Mastercard in Berkshire’s stock portfolio. And when up-and-coming Brazil-based cost processing enterprise StoneCo (NASDAQ:STNE) went public a couple of years in the past, Berkshire purchased greater than 4% of the excellent shares. Lemonade might play the same function within the firm’s funding technique.
Would Buffett take into account any of those?
Simply to reiterate, there isn’t a indication that Buffett or anybody else at Berkshire Hathaway is definitely contemplating any of those stocks. They only have some traits Buffett has been drawn to prior to now and may very well be a great slot in Berkshire’s portfolio.
That mentioned, no matter whether or not Warren Buffett has curiosity in these firms or now, these are two fascinating companies that may very well be wonderful additions to a portfolio that goals to attain a pleasant mixture of progress and earnings over the long term.