How do you get the most bang for your buck in the stock market? You buy conglomerates. These mega-firms encompass multiple organizations all striving to achieve in different areas of business.
How could you truly expect me to get through this article without a mention of Warren Buffett’s famed Berkshire Hathaway?
The company is engaged in so many different areas of business; it actually becomes too wild to think about. Insurance, rail, clothing, jewelry, private jets, home furniture, and even candy are among the portfolio.
If you elect to pick up the Berkshire Hathaway Inc. (NYSE:BRK.A) ‘A’ shares then you’re looking at paying around $160,000 per share. Luckily the ‘B’ shares linked above are a lot cheaper, and more than likely in your portfolio's range.
Berkshire Hathaway Inc. (NYSE:BRK.A)’s broad horizon of companies managed to generate $162 billion in sales last year. That’s up a whole lot since 2008 when they managed to generate some $107 billion.
Net income has also been on the rise at Berkshire. In 2008, the company had a net income of $4.99 billion, and as of last year they managed to boost it to $14.82 billion.
I would make Berkshire Hathaway a part of my portfolio, despite the fact that they don’t pay a dividend. The company is well run, and by all expectations should continue to be even when Buffett steps down. Berkshire also participates in large stock buybacks every once in a while, which puts more money into our portfolios.
Growth at Berkshire is expected to be anywhere from 3-8% per year over the next couple of years.
Now To The Dividends!
Hey, Berkshire Hathaway Inc. (NYSE:BRK.A) may not pay dividends, but that doesn’t mean we have to do without. 3M Co (NYSE:MMM) is another multinational conglomerate that happens to yield investors a nice 2.4%.
3M Co (NYSE:MMM) is the name behind a variety of consumer brands, and they happen to dabble a bit in infrastructure too. They’re no doubt most familiar for Post-It and Scotch tape, but did you also know that 3M could help you with your upstream oil & gas problems? How about keeping your animal safe and healthy?
These thousands of products are helping 3M Co (NYSE:MMM) beat the market and continue down a path of earnings, and even net income growth. Five-year growth in revenues is at a steady 4.7% per year while earnings are growing at 4.1% per year over the same time frame.
Dividends are also growing at 3M Co (NYSE:MMM). Who doesn’t want that? Those dividends are growing by some 3.9% per year. That’s pretty good growth on dividends from a pretty solid company.
Analysts on the stock have growth in earnings being around 9% per year in each of the next two years. This should definitely help 3M Co (NYSE:MMM) at least keep pace with the broader market, if not beat it.
Wait, military? Actually United Technologies Corporation (NYSE:UTX) generates more of their sales from divisions outside of their aircraft engine department. They also sell air conditioning units and elevators.
United Technologies Corporation (NYSE:UTX) offers the most bizarre grouping of companies in this article. Berkshire Hathaway and 3M Co (NYSE:MMM) are both so widespread that they operate almost everywhere while United Technologies are more focused on five divisions that are quite diverse in nature.
Those five different divisions are, however, doing quite well for United Technologies Corporation (NYSE:UTX). The company managed to sell $60 billion in product throughout 2012, and they generated close to $5 billion in profits from those sales.
And they are growing. The growth is at a little lower peg than some other companies out there, but let’s take a look anyway. Five-year revenue growth is at at a low rate of 1.1% per year, and EPS over that same time frame is at 4.7%.
It’s the dividend growth that really stands out at this company as over the last five years their annual payout has increased by around about 11.5% per year. They’ve actually boosted the dividend every year since 2005, that’s not too bad is it? The stock is currently yielding 2.3%, and I’d bet money that it’ll be growing soon.
Buy them all! Each of these three companies has its own set of merits. All three, though, are projected to grow by the analysts that cover them.
If you are interested in dividends then I’d say United Technologies Corporation (NYSE:UTX) is your best buy at this point. The company has been giving their annual payout the boost since 2005, and you can hop in now before the next increase.
IF you are interested in overall diversity, Berkshire Hathaway is your go-to company.
The article Comglomerates Provide the Best Diversification originally appeared on Fool.com and is written by Ash Anderson.
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