Let’s try a little thought experiment. What if you could only buy one share today and you had to hold it forever?
What symbol could withstand the immense pressure? You would need a company with the strength to remain relevant for decades. I should trade in many different fields and sectors, giving my single symbol portfolio some semblance of diversification. And of course, it would require a company with world-class leaders. After all, that team will be trusted with all of my hypothetical savings.
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It would be a cop-out to choose an index fund. An exchange-traded fund that tracks the S&P 500(SNPINDEX: ^GSPC) The market index would fit absolutely perfectly with instant diversification and basically eternal staying power. It also acts as a unique stock in many ways and can be traded just as easily. But again, the Vanguard S&P 500 ETF(NYSEMKT:VOO) In reality, it is not a single action. Therefore, it doesn’t comply with the rules of my silly thought experiment.
At first, I considered a couple of tech giants that span multiple sectors. Amazon(NASDAQ:AMZN) It would give me exposure to e-commerce, brick-and-mortar retail stores, artificial intelligence (AI) and cloud computing, shipping services, and more. Alphabet(NASDAQ:GOOG)(NASDAQ:GOOGL) It focuses mainly on online search and advertising, supported by digital video platforms, Android mobile computing, a nascent robo-taxi service, etc. Both companies seem poised to stay in business and surprise consumers with new business ideas for a long time to come.
But that still doesn’t seem right for this experiment. Alphabet and Amazon can only offer a limited amount of diversification, far from the immediate security that a proper index fund provides.
That requirement drastically narrows my universe of potential stock picks. In the end, there is only one company that can satisfy my demands. say hello to Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) — the closest thing to an index fund in the form of a single company.
First, Berkshire’s diverse business portfolio is legendary. At its core, it’s an insurance company, including auto insurance giant GEICO and 13 other wholly owned insurance brands. But the company also owns Duracell batteries, the BNSF railroad, Kraft Heinz in your refrigerator and Dairy Queen on the go, and much, much more. I counted nearly 70 brands on Berkshire’s list of companies under its direct control.
And that’s just the beginning. Berkshire also manages a large stock investment portfolio. There are 46 stocks in that group of minority investments, led by a Apple(NASDAQ:AAPL) investment that currently amounts to about 70.5 billion dollars. The list includes several multinational banks, food giants, a Chinese leader in electric vehicles and a $2 billion stake in Amazon.
Berkshire’s investments focus on financial services and the industrial sector, but there are a host of other operations here. This is not a snapshot of the economy that perfectly covers all sectors, but I challenge you to find a closer approximation.
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A company is only as good as its leadership, and Berkshire Hathaway is led by top investor Warren Buffett. Beneath that unbeatable name at the top, Berkshire gives free rein to the management team of each business unit.
Buffett prefers to invest in businesses that are so simple that a ham sandwich could handle them effectively. and the still insists on letting high-quality leaders run these foolproof businesses. This is an additional layer of security, insulating Berkshire and its investors from the risks of trading operations.
It’s understandable if you worry about what might happen when Warren Buffett no longer runs Berkshire Hathaway’s masterful business. Charlie Munger, a longtime business partner and Berkshire vice chairman, died a year ago at the age of 99, and Buffett is just a few years younger. Berkshire Hathaway won’t be a “Buffett business” for decades. So what will happen when the legendary investor steps down?
Honestly, I don’t expect big changes. Buffett already leaves important portfolio decisions in the hands of trusted lieutenants, who have learned from the best and should be able to maintain a Buffett and Munger strategy for the long term. For example, Todd Combs and Ted Weschler reportedly led the purchase of Apple stock in 2016. That purchase surely had the blessings of Buffett and/or Munger, but it was not their decision.
Bottom line: Berkshire Hathaway has a deep bench of top-tier money managers. The company might lose a step when Buffett retires, but it should do well for decades to come.
So where does this little thought experiment lead? Straight to the doors of Berkshire Hathaway. With involvement in everything from insurance to ice cream, under the steady hand of a dream investment team, Berkshire is your best bet for a “forever stock.” Of course, nothing is guaranteed in the market. But if I had to put all my eggs in one basket and hold on for dear life, I could do a lot worse than hook up with Buffett’s insurance conglomerate.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Amazon and Vanguard S&P 500 ETFs. The Motley Fool holds positions in and recommends the ETFs of Alphabet, Amazon, Apple, Berkshire Hathaway, and Vanguard S&P 500. The Motley Fool has a disclosure policy.
If You Could Only Buy and Hold One Stock, This Would Be It was originally published by The Motley Fool
