With the 2020 coronavirus market crash still fresh in many investors' memories, you may vividly remember the pain of holding stocks through the panic-stricken market downturn. Between Feb. 12 and April 20 last year, the Nasdaq plummeted more than 30%. It was brutal.
While there's not much investors can do to avoid the impact a market crash can have on the prices of stocks in their portfolios, there are some actions investors can take to help ease the pain during the downturn. One simple thing investors' can do is own the type of companies built to handle tough economic times. Knowing resilient businesses are in your portfolio through a downturn can help give investors the courage to hold onto shares for the long haul -- long enough for shares to rebound and potentially even resume their long-term march upward.
Three great examples of companies with business models likely to thrive in almost any market are investment conglomerate and insurance giant Berkshire Hathaway (BRK.B 0.09%) (BRK.A 0.48%) and waste management and recycling specialist Waste Management (WM -0.64%).
Led by famed investor Warren Buffett, Berkshire Hathaway may have greater staying power than just about any business in the world. Its subsidiaries include powerful insurance giants like Geico and General Re, durable consumer products brands like Duracell and Nebraska Furniture Mart, industrial juggernaut Burlington Northern Santa Fe Railroad, and many other companies built to last.
Of course, Berkshire also operates an equities portfolio focused on owning stakes in even more enduring companies.
Best of all, Berkshire insists on having a balance sheet that prepares it for extreme market conditions.
"Berkshire will forever remain a financial fortress," explained Buffett in the company's 2018 shareholder letter.
In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.
Another company likely to continue producing value for shareholders for decades is Waste Management.
As a scaled disposal and recycling company, it would be extremely difficult for competition to knock Waste Management off of its feet. One of the biggest reasons investors can count on Waste Management's staying power is its ownership of 268 landfill sites and its 348 transfer stations for consolidating, compacting, and transporting waste. Given how difficult it is to receive approvals for new landfills, Waste Management's massive landfill network gives it a significant advantage over new entrants in the space.
Waste Management's scale, competitive advantage, and steady business model lead to strong financials. Over the trailing 12 months, Waste Management generated $2.3 billion of free cash flow on sales of $15.6 billion. In addition, the utility giant paid out $938 million in dividends to shareholders.
While these two stocks may fall along with the broader market during a stock market crash, their underlying businesses will likely continue generating impressive results for shareholders. More importantly, shares of Berkshire Hathaway and Waste Management will likely perform well over the long haul no matter what challenges they face.