To be perfectly clear, there is no such thing as a safe stock. Market forces that have nothing to do with the company's underlying business can cause significant price fluctuations, and even the best companies can certainly experience challenges from time to time.
Having said that, some stocks are clearly safer than others. And in the uncertain market environment that the COVID-19 pandemic has created, it's completely understandable for safety to be just as much of a priority as long-term gains. That's why investors who want a healthy combination of safety and long-term growth potential should take a closer look at Digital Realty Trust (DLR -0.67%) and Berkshire Hathaway (BRK.A 0.43%) (BRK.B 0.42%).
A great growth trend that could accelerate during the coronavirus crash
Digital Realty is a real estate investment trust, or REIT, that owns an operates a portfolio of 267 data centers located around the world. If you aren't familiar, think of data centers as the backbone of the internet -- they are specialized facilities designed to house servers and networking equipment in a reliable and secure environment. As a basic example, when you upload a photo to Facebook or store a document in the cloud, those things need to physically live somewhere. And that somewhere is a data center.
One of the largest REITs of any kind in the world, Digital Realty has the efficiencies of scale, tremendous financial flexibility, and a massive customer base that should put it in an excellent position to capitalize on the surge in connected devices that will occur over the next decade or so. For example, the number of autonomous vehicles shipped will roughly quadruple over the next five years, and the artificial intelligence and virtual/augmented reality device markets are expected to grow from about $30 billion in size today to $283 billion in just the next three years. These are very data-heavy devices, and the upcoming wide-scale rollout of 5G technology should accelerate their adoption.
During the COVID-19 pandemic, more people are making use of the cloud. People are working from home, meeting with friends and family remotely, and are using social media and streaming services more than ever. In fact, Digital Realty just hit a new 52-week high on the day I'm writing this (April 7). How many other stocks could you say the same about?
Cash is king, especially when it's in Warren Buffett's hands
If I had to pick one stock to buy during a market crash, it would probably be Berkshire Hathaway. The conglomerate is the parent company behind more than 60 businesses, most of which are still in full swing during the COVID-19 pandemic. GEICO is still collecting auto insurance premiums and Berkshire Hathaway Energy is still providing utility services, just to name a couple.
Berkshire also owns a massive stock portfolio, with large positions in Apple, Bank of America, Coca-Cola, and many more. Much of the investments were hand-selected by CEO Warren Buffett himself.
I like owning Berkshire during a market crash, especially right now, because one of its biggest weaknesses of the past few years becomes its greatest strength. I'm talking about the company's $128 billion cash hoard, which has gradually built up because outsized valuations have largely prevented Buffett and his team from making large acquisitions and buying large amounts of stock.
Now, with the stock market still more than 20% down from its peak, that's less likely to be an obstacle. In fact, Berkshire is even taking advantage of ultra-low interest rates and quietly raising billions in additional cash in the European and Asian debt markets (at 0% interest). Warren Buffett has a history of making savvy investments during tough times, and he's never had a war chest like this to work with. It's fair to say that Berkshire could actually emerge from the bear market even stronger than it went in.
Invest for the long term
As a final thought, while I believe these two stocks to be very safe to own over the long run, I have absolutely no idea what they'll do over the coming days, weeks, or months. As long as the COVID-19 pandemic persists, I'd expect significant market turbulence, and these two stocks could take investors on a bit of a roller coaster ride until the smoke clears.
The smartest thing you can do as a long-term investor is to buy excellent, well-run businesses and hold onto them year-after-year, no matter what the overall stock market or economy is doing. That's a winning strategy, and these two companies could fit into such a strategy very nicely.