I just read an interesting post by Jennifer Yousfi of MoneyMorning.com on how we can find a little protection in these turbulent markets, Conglomerates.
"The conglomerate sector was down 8.85% for the first quarter of 2008. That might not seem like an argument in favor of conglomerate investing, but when you consider that the Standard & Poor’s 500 Index was down 10.05% for the same period it seems a bit better. And if you go back a little further, you see that for the past two years, conglomerates have gained 5.09% versus the S&P 500’s gain of just 1.37%."
Why Conglomerates? Well, as we all know, the best "protection for an investment portfolio during times of volatility is diversification." We can't always buy different stocks in various industries but with Conglomerates it’s possible to get diversification with just one pick - if you make it a smart one.
There are a few Wall Streeters are against this method of investing, as Conglomerates tend to sell at a discount as a whole then if they were all single businesses. However, Jennifer gives us 4 companies that are good companies and are good investments.
1. Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B)
2. General Electric Co. (GE)
3. 3M Company (MMM)
4. DuPont (DD)
"With a strong portfolio of well-run diversified subsidiaries, strong global presences, comfortable capital positions and AAA credit ratings, both Berkshire and GE are in better positions than most firms to weather an economic storm."
"Considering both their strong credit ratings and their track record for making good investments, I believe that both GE and BRK provide interesting investment opportunities," said Seeking Alpha’s Dan Braem, who is long on both stocks.
A recent study by global consulting firm, Marakon Associates, placed Berkshire Hathaway and GE in the top quartile of best-performing global conglomerates (3M was in the second).
So, if you are looking for a little protection, you may want to be looking at Conglomerates.