Let’s try a little thought experiment. What if I could just buy one stock today and have to hold it forever?
Which ticker could withstand the enormous pressure? I need a company with the power to stay relevant for decades. It should operate in many different domains and sectors, giving my single-ticker portfolio some semblance of diversification. And of course, I would demand a company with world-class leaders. After all, that team will be entrusted with my entire hypothetical nest egg.
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Choosing an index fund would be a way out. An exchange-traded fund that tracks prices S&P500(SNPINDEX: ^GSPC) market index would absolutely fit the bill with instant diversification and basically eternal staying power. It also acts like one stock in many ways and can be traded just as easily. But again, the Vanguard S&P 500 ETF(NYSEMKT:VOO) is actually not a single share. Therefore, it doesn’t follow the rules of my silly thought experiment.
At first I thought of some cross-sector tech giants. Amazon(NASDAQ: AMZN) would introduce me to e-commerce, brick-and-mortar stores, artificial intelligence (AI) and cloud computing, shipping services, and more. Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) has a strong focus on online search and advertising, supported by digital video platforms, Android mobile computers, a fledgling robotaxi service, and so on. Both companies seem willing to stay active and surprise consumers with new business ideas for a long time.
But that still doesn’t feel right for this experiment. Alphabet and Amazon can only provide so much diversification, far from the immediate security that a true index fund provides.
That requirement dramatically limits my universe of possible stock selections. Ultimately, there is only one company that can meet my requirements. Say hello to Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) – which is the closest thing to a single-company index fund.
First and foremost, Berkshire’s diverse business portfolio is legendary. It is an insurance company through and through, with the car insurance giant GEICO and thirteen other insurance brands. But the company also owns Duracell batteries, the BNSF Railroad, Kraft Heinz in your refrigerator and Dairy Queen for takeout, and much, much more. I counted nearly seventy brands on Berkshire’s list of companies under direct control.
And that’s just a start. Berkshire also manages a large portfolio of stock investments. There are 46 stocks in that group of minority investments, led by a Apple(NASDAQ: AAPL) investments worth approximately $70.5 billion. The list includes several multinational banks, food giants, a Chinese electric vehicle leader and a $2 billion stake in Amazon.
Berkshire’s investments focus on the financial services and industrial sectors, but there is a very generous amount of other activity here. This isn’t exactly a perfect sector-wide snapshot of the economy, but I challenge you to find a better approximation.
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A company is only as good as its leadership, and Berkshire Hathaway is led by master investor Warren Buffett. Under that unbeatable name at the top, Berkshire gives free rein to each business unit’s own management team.
Buffett famously prefers to invest in companies that are so simple that a ham sandwich could run them effectively. And him still calls for top quality leaders to run these foolproof businesses. That’s an extra layer of security that insulates Berkshire and its investors from business risks.
It’s understandable to be concerned about what might happen if Warren Buffett no longer leads the masterful Berkshire Hathaway company. Charlie Munger, a longtime business partner and vice chairman of Berkshire, died a year ago at age 99, and Buffett is only a few years younger. Berkshire Hathaway won’t be a “buffet company” for decades to come. So what happens when the legendary investor steps down?
To be honest, I don’t expect any major changes. Buffett already leaves key portfolio decisions to trusted lieutenants, who have learned from the best and should be able to maintain a Buffett-and-Munger strategy over the long term. For example, Todd Combs and Ted Weschler reportedly led the purchase of Apple stock in 2016. That purchase certainly had the blessings of Buffett and/or Munger, but it wasn’t their decision.
Long story short: Berkshire Hathaway has a large group of top-notch fund managers. The company may lose a step if Buffett walks away, but the company should do just fine for decades to come.
So where does this little thought experiment lead? Right on the doorstep of Berkshire Hathaway. With everything from insurance to ice cream under the steady hand of an investing dream team, Berkshire is the best choice 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 hang on for dear life, I could do a lot worse than hitching my wagon to Buffett’s insurance-based 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. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Amazon and Vanguard S&P 500 ETF. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
If I could only buy and hold one stock, this would be it, originally published by The Motley Fool
