When it comes to diversification, most investors prefer going for exchange-traded funds (ETFs). This helps spread risks across various sectors, thus mitigating the chances of experiencing heavy losses. However, Canadian investors only have one reliable option in this regard, which is the SPY stock.
However, the performance of such indices can vary based on several circumstances, which are often out of an investor’s control. So, achieving diversification by investing in companies that allocate capital across several sectors can be a smart choice.
Here are some of the best available options.
Berkshire Hathaway
Berkshire Hathaway (NYSE: BRK.B) is an American multinational holding company. It primarily deals in the insurance sector but has a vast portfolio of several equity positions, subsidiaries and other securities across multiple sectors.
They are retail, home furnishing, apparel, jewelry, machinery, power and natural gas distribution, confectionery, and railroads. It also has a wide array of partially owned companies in its portfolio, which include some of the most stable mega-cap technology and energy companies in the world.
Last quarter, Apple (NASDAQ: AAPL) spent US$18 billion on its share-buyback program. Now, almost 46% of Berkshire’s portfolio consists of Apple stock. Thus, the latter’s share repurchases have increased the value of Berkshire’s stocks by a decent margin. As Apple continues to buy back its equity shares from the market in the near future, it will automatically cause Berkshire stocks to rise, thereby profiting its investors.
Furthermore, Berkshire Hathaway is making a huge investment in the housing sector. In the second quarter (Q2) of 2023, the company purchased 5,969,714 D.R. Horton shares, 152,572 Lennar shares and 11,112 NVR shares. All three companies are big names in the home-building business and will help Berkshire book long-term profits for those who believe the time to buy such companies is when no one else wants to own them — Buffett’s own mantra he lives by.
Brookfield Asset Management
Brookfield Asset Management (TSX: BAM) is a Canada-based company, which provides alternative asset management services. It has approximately US$850 billion worth of assets across multiple sectors like renewable energy and transition, private equity, credit, real estate, and infrastructure.
According to some compelling recent reports, Brookfield has entered its second joint venture with Axis Energy. The two companies are planning on building a renewable energy development platform that can capitalize on the growing demand for green energy in the Indian market.
Additionally, Brookfield is planning on selling Atlantis Paradise Island. It is a luxury resort located in the Bahamas and can fetch up to US$2.5 billion. This move will help the company stabilize its balance sheet and use the proceeds to invest in its other ongoing projects.
For those looking for size and stability in the alternative asset management space, Brookfield continues to be among the top choices for Canadian and U.S. investors right now.
Bottom line
Both these stocks have diverse portfolios and long-term growth strategies, which can generate substantial profits for investors. Thus, investors looking for diversification can consider purchasing these companies instead of investing in broad-based index funds. These are widely diversified holdings companies with a concentration in key areas that could provide outsized gains relative to holding an index ETF over the years and decades to come.
