Riding Out the Trade Wars: A Look at AT&T, Energy Transfer, and Berkshire Hathaway
The ongoing trade war between the United States and various global powers has caused quite the stir in financial markets. Uncertainty surrounding tariffs and potential retaliations have led to market instability and investor anxiety. However, even in such turbulent times, there are companies that stand out for their stability and resilience. In this post, we’ll take a closer look at three such companies: AT&T, Energy Transfer, and Berkshire Hathaway.
AT&T: Minimal Exposure, Maximal Cash Flow
First up, let’s discuss AT&T (T). With a market capitalization of over $200 billion, AT&T is a telecommunications behemoth. The company operates in three main segments: Communications, WarnerMedia, and Latin America. While the Communications segment is exposed to some degree of tariffs, the impact is expected to be minimal. This is because a significant portion of AT&T’s revenue comes from domestic sources, and tariffs on imported goods represent only a fraction of the total.
Moreover, AT&T boasts a strong cash flow, which makes it an attractive investment opportunity. The company generated over $21 billion in free cash flow in 2019, and this trend is expected to continue. The dividend yield, currently at around 6.7%, is also quite attractive.
Energy Transfer: Toll Operator Model and Robust Dividend
Next, let’s focus on Energy Transfer (ET). Energy Transfer is a master limited partnership (MLP) that operates primarily in the natural gas liquids (NGL) market. The company’s business model is based on toll operations, meaning it charges fees for using its infrastructure. This model provides Energy Transfer with a steady cash flow, even during oil price fluctuations. In fact, the company’s cash flow has remained relatively stable over the past few years, despite the volatility in the energy market.
Additionally, Energy Transfer offers a generous dividend yield, currently at around 8.3%. The company has consistently paid out dividends for over 20 years and has increased them annually for the past 24 years. This makes Energy Transfer an appealing investment for income-focused investors.
Berkshire Hathaway: Diversified Portfolio and Strong Balance Sheet
Lastly, we have Berkshire Hathaway (BRK.A). With a market capitalization of over $600 billion, Berkshire Hathaway is the fourth-largest publicly traded company in the world. The company is led by the legendary Warren Buffett and operates in a diverse range of industries, including insurance, retail, utilities, and manufacturing. This diversification reduces Berkshire Hathaway’s exposure to any one industry or sector, making it a more stable investment choice.
Furthermore, Berkshire Hathaway has a strong balance sheet. The company had over $140 billion in cash and cash equivalents at the end of 2019. This cash hoard provides Berkshire Hathaway with a significant cushion, allowing the company to weather any economic downturns and take advantage of potential buying opportunities.
Personal and Global Implications
Now, let’s discuss the potential implications of the trade war on individual investors and the world at large.
Personal Implications
For individual investors, the trade war could mean increased volatility in the markets. However, by focusing on stable, cash-generating companies like AT&T, Energy Transfer, and Berkshire Hathaway, investors can mitigate some of this risk. These companies have proven track records of generating consistent cash flows and providing attractive dividends, making them solid long-term investment choices.
Global Implications
On a global scale, the trade war could lead to a slowdown in economic growth. The International Monetary Fund (IMF) has lowered its global growth forecast for 2019 and 2020 due to the trade tensions. This slowdown could lead to job losses, reduced consumer spending, and decreased corporate profits. However, it’s important to note that the trade war is just one of many factors contributing to the economic slowdown. Others include aging populations, technological disruptions, and geopolitical tensions.
Conclusion
In conclusion, while the trade war has caused market instability, there are companies that can weather the storm. AT&T, Energy Transfer, and Berkshire Hathaway are prime examples of such companies. Their stable cash flows, attractive dividends, and robust balance sheets make them reliable investment choices, even in uncertain times. So, whether you’re an individual investor or a global economic powerhouse, consider focusing on these companies as you navigate the trade war and beyond.
- AT&T: Minimal exposure to tariffs and strong cash flow
- Energy Transfer: Toll operator model ensures reliable cash flow and a strong dividend
- Berkshire Hathaway: Diversified portfolio and strong balance sheet
