The recent stock market downturn has been painful, to put it mildly. Nobody likes watching the value of their stock portfolio or 401(k) declining. And don't forget that there's real pain going on in the economy right now for many people.
Having said that, I like to keep some cash on hand to use for great long-term investment opportunities when stocks get beaten down, and I recently added to three of my existing stock positions that should still be excellent investments over time. Here's why I thought it was a good idea to double down on Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%), Empire State Realty Trust (ESRT -2.56%), and Ryman Hospitality Properties (RHP -0.86%).
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A great stock to own as a recession begins
This one shouldn't be too much of a surprise. I recently wrote an article that explained why Berkshire could actually come out of the coronavirus crash in better shape than when it went in.
For one thing, its businesses are (for the most part) going to do just fine. For example, the company's GEICO auto insurance business will keep collecting premiums from drivers, and Duracell will still be making and selling batteries.
In addition, Berkshire is sitting on a mountain of cash. At the end of 2019, Berkshire had $128 billion in cash and equivalents on its balance sheet. Not only that, but Berkshire has been quietly raising more cash on the debt markets in Europe and Asia (at 0% interest, by the way).
CEO Warren Buffett has a proven track record of finding excellent investment opportunities during tough market environments, and I'd be shocked if he doesn't make some big moves during the downturn.
Irreplaceable assets and a solid balance sheet
Empire State Realty Trust is the first of two real estate investment trusts, or REITs, on this list, and there's a good reason I've been doing a bunch of buying in that sector. For one thing, real estate is my main area of expertise, so I'm confident I can find great opportunities. Plus, real estate has been one of the worst-performing areas of the market recently, despite generally being a relatively safe and defensive sector.
Like its name implies, Empire State Realty Trust owns the famous Empire State Building, as well as several other buildings in Manhattan and the surrounding areas. The properties are primarily composed of office space, but as is typical of New York City high-rise offices, there's a component of street-level retail space, as well. In addition, the company operates the observatory on top of the Empire State Building, which can be a very lucrative business.
As you might expect in the coronavirus outbreak, the observatory is closed indefinitely. And it couldn't have come at a worse time -- the company had just completed renovations on its 102nd floor observation deck (the higher of the two observatory levels) and was excited to see how it would perform as the weather started to warm up. Plus, with so many people working at home, furloughed, or laid off, there's some uncertainty about the long-term effects on office real estate.
However, Empire State Realty Trust is well-capitalized and should be able to make it through the downturn just fine. The company has an excellent management team and the Empire State Building will once again be a must-visit for any NYC tourist. Empire's shares are more than 45% below their 52-week high and offer a dividend yield of more than 5%, so this could be a great opportunity for patient investors.
A beaten-down hotel owner with a bright future
Finally, I decided to add to one of my favorite hotel REITs, Ryman Hospitality Properties. With its stock about 65% down from its February highs, Ryman is one of the most beaten-down stocks in my portfolio and, to be clear, is likely to be the most volatile of the three on this list until the COVID-19 pandemic subsides.
Ryman has two sides to its business. It operates five massive destination hotels under the Gaylord brand name, as well as a couple of smaller hotel properties. If you aren't familiar, the Gaylord properties are group-focused hotels, and with so many conferences and events being cancelled in 2020, it's no wonder why Ryman has taken such a dive.
The other side of the business consists of entertainment assets. Ryman owns the Grand Ole Opry and Ryman Auditorium in Nashville, as well as the new (but growing) Ole Red entertainment and dining venue brand.
As of early April, all of Ryman's hotels and entertainment properties are closed. However, the company has plenty of liquidity to survive, even if the shutdown lasts for longer than expected. With over 6 million future room nights on the books, Ryman's business will be just fine long term.
A word about my expectations
As a final thought, it's important to emphasize that I'm not trying to call the bottom in any of these. If the pandemic drags on for longer than expected or the resulting recession is longer or deeper than experts think it will be, these stocks could certainly go lower in the near term. And whatever the case, their share prices (and the whole market, for that matter) are likely to be very turbulent until we have a better sense of when things will get back to normal.
For this reason, I bought these for the long haul and have no intention of selling any of them for years, if not decades. But I'm confident that when I look back in 10, 20, or 30 years, I'll be glad I added to my positions in each of them.
