When investing, it’s always important to have a diverse portfolio. This diversify means holding a mix of stocks, bonds, and other investments. It also means investing in shares of companies of varying sizes and from different industries, sectors, and countries. Some individual companies, however, have such a wide variety of businesses and revenue streams that they can—by themselves—help make your portfolio more diverse.
Most of these companies are large, multinational corporations with billions of dollars in revenue. They are often referred to as “blue chip” stocks, and they include some household names as well as some you may not have considered. Because of the diversity of their revenue streams, these companies are very solid stock market performers and are often immune from big swings in the share price.
Let’s examine some of the most diversified U.S. companies and their potential impact on your investment portfolio.
Johnson & Johnson [NYSE: JNJ]
We think of Johnson & Johnson as the maker of Band-Aids, baby shampoo, and other home health products, but this company does so much more. In addition to producing a wide range of prescription and over-the-counter drugs, it has a robust medical device segment featuring instruments used in major surgeries. Johnson & Johnson also has a sports-performance research institute for athletes.
It’s no wonder the company has been one of the most consistently solid performers on the New York Stock Exchange, increasing its dividend to shareholders every year for 50 consecutive years.
3M [NYSE: MMM]
At this point, most people don’t even remember what "3M" stands for. Founded in 1902 and formerly known as the Minnesota Mining and Manufacturing Company, it’s now a huge conglomerate that makes everything from Post-It notes to semiconductors.
This Minneapolis-based company has more than 60,000 products for both businesses and consumers and boasts more than $30 billion in annual revenue. It has also raised its dividend every year for six decades.
Berkshire Hathaway [NYSE: BRK]
Founded by famed investor Warren Buffett, Berkshire Hathaway’s holdings include big investments in industries ranging from technology (Apple), banking (Wells Fargo, Bank of America), food and beverage (Coca-Cola), insurance (GEICO), and even clothing (Fruit of the Loom). No wonder the company reported revenues of $245 billion in 2020.
Of course, a single share of Berkshire Hathaway costs more than $425,000 as of Oct. 11, 2021, so save your pennies.
GE [NYSE: GE]
This company may be the very definition of a conglomerate. The firm still makes light bulbs and refrigerators but is also involved in businesses ranging from energy to weapons, to finance and aircraft engines. It even once owned the television network NBC. With revenues of more than $79.6 billion in 2020, it’s one of the largest companies in the world and one of the most diversified.
Alphabet [NASDAQ: GOOG]
We think of Alphabet as simply the holding company for the search engine Google. But this company has broadened its revenue base by delving into all things tech and some even not-so-tech. In addition to generating revenue from Internet advertising, it operates the Android operating system and has manufactured phones of its own.
Alphabet has also made money from life sciences and biotechnology was a huge early investor in ridesharing company Uber and has its own driverless car initiative.
The Walt Disney Co. [NYSE: DIS]
This company is more than just Mickey Mouse. Disney has theme parks and resorts around the world. It has movies, including all of the Marvel superhero and Star Wars franchises. It owns ABC and the ESPN networks, it also owns Hulu and recently launched a direct-to-consumer video service called Disney+.
In 2019, the company acquired the film and TV assets of 21st Century Fox. It’s also one of the most recognizable brands overseas. No wonder it reported a whopping $67 billion in 2021.
Danaher [NYSE: DHR]
While not as large as some companies on this list, Danaher can certainly boast of a diverse set of businesses. The company has four divisions, all broadly focused on manufacturing: environmental and applied solutions, life sciences, diagnostics, and dental. The company makes dental implants and graphic arts software. It makes microscopes and water treatment equipment.
Danaher enjoys adding to its business portfolio through acquisitions—it prefers to keep its cash than pay a hefty dividend—and will probably have purchased another company by the time you finish reading this article.
Honeywell [NYSE: HON]
This company refers to itself as a “software-industrial” conglomerate, but that hardly gives a good sense of the breadth of its businesses. Honeywell employs more than 103,000 people building everything from aircraft wheels to packaging for pharmaceuticals.
The company was founded in 1885 as the maker of the first crude thermostat, and through a series of mergers evolved to become one of the world’s largest aerospace firms. Most of Honeywell’s revenue comes from four segments: Aerospace, home, and building technologies, performance, and materials technology, and safety and productivity solutions. All of these segments have seen steady growth, and the overall company has been a solid stock market performer for decades.
Honeywell made more than $32 billion in revenue in 2020, and investors should love to see all that money coming from so many different sources.
Frequently Asked Questions (FAQs)
Why should a company diversify?
When a company diversifies its revenue streams, it increases its financial stability. If something bad happens to one of the revenue streams, it won't necessarily affect the others, so the business will likely continue making money. For example, consider a hamburger stand. If cows go extinct, the stand will no longer be able to serve food. If the hamburger stand diversifies by adding chicken sandwiches to the menu, then it will continue to have food items, even if there is an issue with burger supplies.
What steps can a company take to diversify its portfolio?
Companies may look for diversification opportunities that are similar to existing operations. That may seem counterintuitive, but it allows companies to slowly expand their operations without needing to invest significant resources toward learning a brand-new business all at once. For example, a company may purchase a supplier to expand its operations into the supply side of an industry it already knows a bit.