I've been strategically building my cash position over the past couple of years as the market has roared higher. I wanted to have a cushion in case there was a crash.
That turned out to be a very wise decision. My cash position has helped mute some of the impact of the recent major sell-off while providing me with capital to go on the offensive.
I plan to deploy some of my cash position this week to capitalize on the recent market volatility caused by the Trump administration's "reciprocal tariff" policy. However, I'm holding back some cash in case the sell-off worsens.
I'm putting together a shopping list of high-quality stocks I'd love to buy if they head even lower. Topping my list are Berkshire Hathaway (BRK.B +0.22%)(BRK.A +0.21%), Alphabet (NASDAQ: GOOG) (GOOGL 0.31%), and Brookfield Infrastructure (BIPC 2.09%)(BIP 2.08%). Here's why I'd load up on this trio if the sell-off intensifies.
Record cash to deploy as opportunities arise
NYSE: BRK.B
Key Data Points
Warren Buffett's Berkshire Hathaway is a wealth-creating machine. It owns a diversified portfolio of excellent operating companies. Berkshire also has a large investment portfolio of high-quality publicly traded stocks. The operating businesses and portfolio generate cash that Berkshire can deploy when it finds compelling opportunities, such as acquiring new operating companies or buying more stocks.
Given the rise in valuations over the past couple of years, Berkshire Hathaway has been building cash while waiting for more compelling investment opportunities. The company ended the fourth quarter with a record $334 billion cash pile, built up through retained earnings, dividend payments, and trimming its investment portfolio.
That massive cash position gives Berkshire tremendous financial flexibility to weather a potential recession. It also puts the company in a strong strategic position to capitalize on opportunities that could arise during an economic downturn. It's a top-quality company that I wouldn't hesitate to load up on if its stock price takes a bigger hit from a continuation of the market crash.
A top-notch tech titan
NASDAQ: GOOG
Key Data Points
Shares of Google's parent company, Alphabet, have already taken a big hit during the sell-off, falling almost 30%. I already started adding to my position last month and would love to buy even more shares if they continue their descent.
One thing I love about Alphabet is its financial strength. The technology titan ended last year with over $110 billion of cash, cash equivalents, and marketable securities on its balance sheet against less than $12 billion of debt. Meanwhile, the company's core business in search, cloud, and streaming generates massive cash flows (the company produced almost $25 billion in free cash flow in the fourth quarter alone).
The company is using its financial strength to invest in growing its business and repurchasing shares. Alphabet is spending heavily on artificial intelligence (AI) to become a leader in that transformational technology. The company also recently agreed to acquire leading cloud security platform Wiz for $32 billion in cash. Meanwhile, it's using its remaining excess free cash flow to repurchase shares.
With its stock price down, future repurchases will be even more accretive to investors.
Driven by the three D's
NYSE: BIPC
Key Data Points
Brookfield Infrastructure is a leading global infrastructure investor. It owns utilities, energy midstream, transportation, and data infrastructure assets worldwide. These businesses generate very stable cash flow, backed by long-term contracts and government-regulated rate structures.
The company routinely recycles capital by selling mature assets and reinvesting that cash into new investments with higher return potential. It has been focusing on making new investments that capitalize on three major themes: decarbonization, digitalization, and deglobalization. The tariff policy could accelerate the deglobalization trend, playing right into Brookfield's strategy.
Brookfield has also been building cash via its capital recycling strategy to redeploy as new opportunities arise. The market turbulence could provide the company with additional opportunities to invest capital across its themes, including those that will benefit from increased deglobalization.
Loading up on quality
Market crashes can be scary times. Seeing a big chunk of your wealth vanish over a few weeks can be disheartening. However, they can be great opportunities to buy high-quality companies at much lower prices.
That's why I strategically hold cash, which I plan to steadily deploy during the current downturn. I want to buy more shares of high-quality companies like Berkshire, Alphabet, and Brookfield Infrastructure because they can withstand whatever's ahead. Meanwhile, loading up on their shares when they're down should enable me to earn even higher returns over the long run as fear subsides and their stock prices recover.
