Stocks with a $1 trillion market value may seem invincible, but they aren’t.
Many of these stocks have seen their earnings and valuations soar due to AI.
However, one of these stocks is very likely to outperform in a bear market.
Remarkably, there are now over 10 stocks in the S&P 500 index with market values exceeding $1 trillion. I don’t know how many people could have predicted that at the turn of the century. Even more remarkable is the fact that several more aren’t too far away from joining this elite group.
Now, many stocks in the $1 trillion club have benefited from the artificial intelligence (AI) boom. Some have high valuations, while others truly generate tremendous free cash flow and earnings.
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At this size, one might think that all of these stocks are too big to fail. Some very well might be, but I believe several could be vulnerable to big sell-offs in a bear market, in which the market falls at least 20% from a recent peak, as investors take a risk-off approach to AI.
However, I believe one would outperform in a bear market. It’s not remotely close, and the stock is actually on sale.
Image source: Getty Images.
The clear quality name to own in a bear market is Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB), which has a market capitalization of just over $1 trillion. Berkshire is the large conglomerate that the great Warren Buffett and the late Charlie Munger built into an absolute juggernaut through many decades of disciplined investing focused on fundamentals and the power of compounding.
While I do believe many of the hyperscalers have built diversified tech businesses that will survive even if AI struggles, that doesn’t mean their stocks won’t take a hit, as they have all performed exceptionally well as beneficiaries of AI.
Berkshire doesn’t focus on AI, but it has a number of business lines that are quite different from one another and have achieved a certain scale and moat that will be difficult for most competitors to replicate. Berkshire, the owner of GEICO, runs the third-largest property and casualty insurance company in the U.S. GEICO is also the second-largest private passenger auto insurance company in the U.S.
Berkshire also owns a significant number of large energy assets, a large mortgage business, and the Burlington Northern Santa Fe Railroad, the largest railway company in the U.S., among others.
While Berkshire isn’t going to outgrow AI companies in a bull market, it will outperform them in a bear market because it owns durable businesses that span different and vital parts of the economy and can perform across various interest rate environments. These businesses can also implement AI across many aspects of their operations to improve efficiency.
The other great thing about Berkshire is that it earns tens of billions of dollars a year in profits, even after removing its tens of billions in investment gains. The investment gains come from Berkshire’s nearly $330 billion equity portfolio, in which Buffett and his team have invested in stocks for decades across a variety of sectors. Buffett is widely considered one of the greatest investors of all time.
Finally, Berkshire has a fortress balance sheet. At the end of the first quarter of 2026, cash, equivalents, and short-term investments in U.S. Treasury bills approached nearly $400 billion. While some investors would like to see Berkshire put that money to work, it will be good to have it in any bear market, and also allow Berkshire to be aggressive if it sees opportunities in a down market.
Berkshire stock has struggled this year, down 4.5%, compared with the S&P 500’s 10.5% gain. Part of this may be due to Buffett stepping down as CEO at the end of 2025.
Buffett chose the longtime Berkshire veteran Greg Abel as his successor. Abel is certainly capable, but no one can ever replace Buffett, who likely earned Berkshire a premium in the market. Still, for investors looking to add protection against a potential bear market, Berkshire stock is on sale.
One way to value Berkshire is on a price-to-tangible-book basis, which compares a company’s market cap or stock price to its tangible book value (TBV), or TBV per share, which is essentially equity minus intangible assets and goodwill. Price-to-TBV is a common way to value financial stocks.
As of this writing, Berkshire traded at a price-to-TBV ratio of 1.68. Its five-year average is 1.86. If you are looking to add, now is as good a time as any.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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