The Ideal Forever Stock: Why Berkshire Hathaway Could Be Your Best Bet
Imagine if you could only invest in one stock for the rest of your life. What would it be? The answer requires a solid, diverse business capable of remaining important for decades, ideally led by a trusted team. With this challenge in mind, let’s explore the candidate that fits the bill.
Why Index Funds and Tech Stocks Fall Short
Choosing an index fund would be the easy way out. While an exchange-traded fund tracking the S&P 500 (SNPINDEX: ^GSPC) provides instant diversification, it technically does not meet the criteria of a single stock. Vanguard S&P 500 ETF (NYSEMKT: VOO) may act like one, but it doesn’t count in this thought experiment.
Initially, I looked at tech companies like Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Amazon’s reach spans e-commerce, physical retail, AI, and cloud services—all crucial sectors. Alphabet boasts dominance in online search and advertising while expanding into various tech areas, including mobile computing and self-driving cars. Both companies have strong foundations and the ability to innovate. However, they cannot provide the broad diversification needed.
This narrowing of options leads me to focus on a single standout company: Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). This conglomerate resembles an index fund in the structure of one company, fulfilling my criteria successfully.
An Impressive Portfolio at Berkshire Hathaway
Berkshire Hathaway’s diverse business portfolio is remarkable. At its core, it is an insurance powerhouse, boasting the GEICO car insurance brand along with 13 other wholly owned insurance firms. Beyond that, the company owns well-known names such as Duracell batteries, BNSF railway, Kraft Heinz, and Dairy Queen. In total, there are nearly 70 brands under its control.
Berkshire also has a significant portfolio of stock investments, including 46 minority stakes. The crown jewel of these is its investment in Apple (NASDAQ: AAPL), valued at approximately $70.5 billion. Additional investments feature multinational banks, food industry giants, a leading Chinese electric vehicle manufacturer, and a $2 billion stake in Amazon.
The company primarily focuses on financial services and industrials, yet operates across numerous sectors. While it may not cover every aspect of the economy, it comes remarkably close.
Image Source: The Motley Fool.
Leadership at Berkshire Hathaway
The effectiveness of a company often hinges on its leadership, and Berkshire Hathaway is steered by the legendary investor, Warren Buffett. Each business unit enjoys considerable freedom under the guidance of skilled management teams.
Buffett favors simple businesses, ones that could be run easily even by someone without extensive experience. However, he also empowers top-tier leaders to operate these companies, adding a protective layer against risks.
Concerns may arise regarding the future once Buffett steps down, especially after the passing of longtime partner and vice chairman Charlie Munger last year at age 99. But there’s no need for alarm. Buffett has delegated key investment decisions to trusted associates like Todd Combs and Ted Weschler, who have been involved in significant purchases like Apple stocks in 2016. While Buffett’s exit will be a loss, the company has built a deep bench of talent for smooth transitions.
To summarize, Berkshire Hathaway stands out as a solid “forever stock.” It holds investments from insurance to ice cream, backed by a dedicated investment team. While no market investment guarantees success, placing your trust in Buffett’s conglomerate could be a wise choice.
Is Now the Time to Invest in Berkshire Hathaway?
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John Mackey, former CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, also sits on the board. Anders Bylund has positions in Alphabet, Amazon, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
