Conglomerate: Made up of parts from various sources or of various kinds. -- Merriam-Webster Dictionary
When the stock market gets volatile, companies with a diverse set of products can provide a lot of value and stability to investors. One of their business segments may be down, but another will be up, giving some piece of mind that operating conditions won't get too bad.
If the market does crash, here are the conglomerates with the diversity and breadth to help investors sleep at night.
Few companies, if any, have the sheer diversity of products as 3M (NYSE:MMM). The company sells products for the energy industry, healthcare, technology, consumer goods, and more. It's also in nearly every country around the world, getting over 70% of sales from outside the U.S.
3M is also in the unique position of being a key supplier to many industries. The company supplies high-tech products like brightness enhancement films, specialty tapes, and innovative coatings that make products like LCD TVs, iPhones, and wind turbines possible. But as a supplier, it doesn't have to take the end-product risk many companies take. Still, 3M gets to play a part in growth in many industries.
On top of its diverse product base, 3M is about as consistent as a stock can get. 3M has paid a dividend uninterrupted for 98 straight years and has increased its dividend for 57 straight years. That's the kind of consistency any investor should want from a conglomerate stock.
Had GE (NYSE:GE) decided to keep its financial unit, I may have left it off this list. The last time the market crashed, in 2008 and 2009, it was GE's finance arm that nearly dealt a death blow to the company, making it a high-risk stock if the market were to crash again. But GE recently decided to sell most of its finance unit, putting its focus back on the electric and industrial products it was built on.
GE has a lot of businesses, but at its core, the company is an energy company. Turbines provide the basis for its aviation, wind, and power plant businesses, and the company's foundation as an electrical product supplier remains one of its biggest businesses.
When the stock market crashes, a lot of businesses can be upended, but energy remains very steady, no matter what the economy or stock market look like. That plays into GE's hands and makes it a great stock to own if the market crashes in the near future.
3M and GE have core competencies that they've been able to expand to a lot of markets, but the third stock on my list -- Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) -- has Warren Buffett. The conglomerate he has built is more of a collection of diverse businesses than an intertwined company, but he has made it work for decades.
Think about just a few of the companies Berkshire Hathaway owns: Dairy Queen, Geico, Fruit of the Loom, Heinz, Helzberg Diamonds, Benjamin Moore, Burlington Northern, and See's Candies. Those businesses have almost nothing in common, but that's the beauty of Berkshire Hathaway. Buffett has been able to collect a large number of highly profitable businesses, creating a company that can handle any downturn the economy or market could face.
But the best thing Berkshire Hathaway has going for it if the market crashes is Warren Buffett himself. As he showed during the last recession, he is able to make wise and timely investments when the market is down, meaning a crash is actually an opportunity for him. Not a lot of companies can say that.
A crash is coming
We don't know when a stock market crash is coming, or what will cause it, but history tells us that it's just a matter of time before stocks crash again. When it comes, these three stocks will give you some stability in your portfolio, making it a little easier to sleep at night.