With a huge cash pile and diversified businesses, Warren Buffett’s Berkshire Hathaway has outperformed the market during an economic downturn, according to UBS. The group has proven resilient in and through the three most recent recessions since the early 1990s, the Wall Street firm said after studying performance data. It shows Berkshire stock outperforming the S&P 500 and other financial indexes. “Over the past three recessions, BRK stock has outperformed the market and other financials thanks to its diversified business structure, very strong balance sheet, and strong balance sheet,” said UBS analyst Brian Meredith. and substantial liquidity”. “Given the uncertain economic outlook for 2023, we believe BRK’s stock could outperform.” The analyst also called Berkshire “a defensive game in an uncertain economic outlook.” The Omaha-based group’s business is a patchwork of companies spanning railroads, energy, insurance, home furnishing and retail. The diversification of businesses has historically helped Berkshire weather the turmoil in the economy. Fundamentally, Berkshire’s insurance operations will be relatively sensitive to an economic slowdown and a favorable underlying backdrop with growing trade flows and “hard” reinsurance prices, UBS said. and the rise from the Alleghany acquisition. Berkshire has agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 a share, in cash, marking Buffett’s biggest deal since 2016. ended in the fourth quarter. On the other hand, Berkshire’s non-insurance businesses are more economically or cyclically sensitive, particularly rail and real estate, UBS said. UBS says these businesses could provide a headwind for Berkshire in 2023. However, Berkshire has historically been able to capitalize on economic downturns by buying or investing in quality businesses. At attractive prices, this tends to offset any drag on their business, UBS said. Buffett bought in a frenzy during the tumultuous 2022. In addition to the Alleghany deal, the group used a substantial amount of cash to buy public stocks including Chevron , Occidental Petroleum and Taiwan Semiconductor . Occidental is the best-performing stock in the S&P 500, more than doubling last year. “BRK has proven itself to be an effective capital manager over the long term and has a substantial cash balance,” says Meredith. “A positive buyback or a higher-than-expected share buyback could be an additional catalyst.” UBS said Berkshire shares are currently trading at a 20% discount to the group’s intrinsic value, which could prompt the “Oracle of Omaha” to buy back more of its shares. The group’s shares are doing well into 2022 with a 4% gain, but the stock is down 14% from its all-time high of $544,389.25 reached in March 2022. At the end of September, The corporation has amassed a cash pile of nearly $109 billion.