Let's face it: The market has been pretty tough so far in 2022. Year to date, the S&P 500 is down 7%, and the Nasdaq has dropped 16%. Drops like we've seen this year are completely normal and part of the regular cadence of long-term investing. That said, it never feels good to see a portfolio full of red.
In times like this, it helps to have some anchor positions in your portfolio. Strong, established, resilient companies will still see ups and downs along with the broader market, but owning some of these stalwarts can blunt the impact of larger market movements. Let's take a closer look at three companies that can help solidify your portfolio.
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1. Berkshire Hathaway
When growth stocks were rocketing to all-time highs throughout 2020 and early 2021, it was easy to think Berkshire Hathaway's (BRK.A 1.18%) (BRK.B 1.30%) time had passed. Why invest in a "boring" conglomerate like Berkshire when there's parabolic growth happening in the tech sector?
Well the answer to that question is now apparent. As of this writing, Berkshire is up 53% from the beginning of 2020, compared to the S&P 500's 42% gain.
To be fair, we have the benefit of hindsight. This would have been more difficult to foresee when Berkshire finished 2020 trailing the S&P 500 by 16% for the year.
The point is that diversification is important to any portfolio, and Berkshire provides the kind of slow, steady growth that only becomes evident over the long term. Berkshire grew its earnings 111% in 2021, but it's important to realize that was an outsized gain based on favorable comps because of how rough 2020 was on Berkshire's business. Earnings were still up 10% compared to 2019, which isn't terrible for a business of Berkshire's size. Zooming out even further, Berkshire's earnings are up almost 300% over the past five years.
Looking forward, Berkshire has a balance sheet that gives it a lot of options when looking for companies to invest in or acquire. Fiscal 2021 ended with $144 billion on the balance sheet, ready to deploy whenever management sees fit. After decades of stellar capital allocation, I'm inclined to trust that Warren Buffett and Charlie Munger will continue to make decisions for Berkshire that will be accretive to shareholder value.
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2. Apple
Year to date, Apple (AAPL -1.22%) is down 8%, trailing the S&P 500, which has dropped 7%. While that doesn't sound like the performance of a resilient company, it's a very small sample size. Taking a step back, Apple has been one of the best long-term performers over the past five years, beating the return of the S&P 500 by over 280%.
Apple's recently reported Q1 2022 results were impressive and showed the company's dominant position in the tech sector. Revenue for the quarter was a record $124 billion, up 11% from the year-ago quarter. This growth came from both its product and services sectors.
Of particular interest was the 24% gain in the services segment. This includes high-margin revenue from Apple's various subscription services and speaks to the company's success at monetizing customers once they've purchased a hardware device and entered Apple's ecosystem.
It's not only the continued growth and track record of returns that makes Apple a stock worth owning. The company has been very shareholder-friendly with its capital allocation strategy. Apple paid $3.7 billion in dividends to shareholders in Q1 and repurchased $14 billion of its shares. Over the past five years Apple has repurchased 22% of its shares outstanding, thus increasing by that amount the value of every share owned by Apple's investors.
Apple presents the best of both worlds for investors. It's still a company at the forefront of technology, growing revenues and profits in impressive ways. It's also large and established enough to provide some stability in your portfolio.
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3. Old Dominion Freight Line
While not as ubiquitous in the world of investing as Berkshire or Apple, Old Dominion Freight Line (ODFL 1.93%) is a company not to be ignored. It is a leader in the less-than-truckload (LTL) trucking space. Put simply, rather than operate a fleet where each truck delivers a single load to a single location, Old Dominion operates a highly efficient network of trucks that make many stops and transfers, delivering to several locations along its routes. Old Dominion is one of the largest companies handling this specific type of trucking in North America.
2021 was another strong year for Old Dominion. Compared to 2020, revenue increased 31%, operating income grew 53%, and net income was up 54%. The balance sheet is also solid, with $717 million in total cash and only $203 million in debt.
Old Dominion's business is picking up steam in Q1. After LTL tons per day increased 14% in Q4, a recently released Q1 update pegged that growth at 18%. This metric was attributed to a 20% increase in LTL shipments per day. It's clear that Old Dominion's position in the LTL trucking space is only getting stronger.
Like Berkshire and Apple, Old Dominion has been reducing its share count. Over the past five years, shares outstanding have been reduced by 7%. The company also pays a dividend that currently has a modest yield of 0.28%.
For investors looking for a resilient, stable company that also provides exposure to the industrials sector, Old Dominion Freight Line is a smart choice.
