In the mid-2000s, a former medical student turned portfolio manager named Michael Burry predicted the housing crisis and its economic fallout during the Great Recession. In more recent history, billionaires like Chamath Palihapitiya have emerged as prominent voices on markets, politics, and everything in between.
But the “what have you done for me lately?” mentality of the investment industry makes me skeptical that Burry or Palihapitiya will remain relevant in the coming decades. That’s tough.
I can think of one investor for whom this question doesn’t really apply. Over the course of several decades, Warren Buffett has become one of the world’s best-known investors thanks to a tireless commitment to simplicity and a distaste for drama and excessive risk.
Let’s take a look at Buffett’s philosophy and assess his portfolio. While the Oracle of Omaha has had many multibaggers over the years, I see one stock as a special long-term opportunity.
Buffett’s Investment Philosophy Unraveled
Buffett’s investing style is based on a number of simple, clear philosophies.
To start with, Buffett is a contrarian. To be fair, so is Michael Burry. But unlike Burry, Buffett is not someone who takes short positions or bets against America in times of recession.
Rather, Buffett looks for value opportunities that may be underestimated or misunderstood. In other words, a specific stock price or valuation multiple doesn’t always tell the whole story about a company.
Buffett has repeatedly taken positions that at first glance seem puzzling. But after careful analysis, investors have discovered that he has a knack for identifying companies with strong, consistent cash flow and broad brand appeal.
Notable Buffett Investments
Given the above explanation, it’s probably not surprising that Buffett is fond of blue-chip stocks. While he has experimented with some growth stocks in emerging areas like artificial intelligence (AI), the vast majority of his portfolio is concentrated in more mundane companies in financial services, consumer goods, telecommunications, and energy.
Some of Buffett’s biggest winners over the years include: Apple And Coca ColaUnlike many other technology companies, Apple is unique in that it fully meets Buffett’s criteria: pursuing growth, but not at the expense of consistent profits.
Even though Buffett hasn’t owned Apple stock in a decade, it’s currently his largest position. And that’s even after he sold a large portion of the position and reinvested the profits in government bonds.
As for Coca-Cola, Buffett has owned the stock for decades. While this has resulted in significant price appreciation in his position, the real sweetener for Buffett is Coca-Cola’s generous and reliable dividend.
Which Warren Buffett stock do I think is the best option for the long term?
My top Warren Buffett stock is Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)the holding company for all its positions.
While companies like Apple and Coca-Cola are fairly safe bets for investors, no stock is immune to macro themes like economic slowdowns or changes in monetary policy, which can have ripple effects on the stock market, regardless of the sector or specific companies.
Investing in Berkshire Hathaway inherently provides exposure to a number of high-quality companies across a variety of sectors. In addition to Apple and Coca-Cola, some of Berkshire’s largest positions include American Express, Occidental petroleum, Bank of America, ChevronAnd Visa.
Berkshire’s portfolio offers investors a level of diversification comparable to S&P 500But the added bonus is that you also get the intangible qualities of Buffett’s mindset, along with the unparalleled expertise of his portfolio management team of Ted Weschler and Todd Combs.
Berkshire’s track record speaks for itself. From 1964 to 2023, Berkshire generated a total return of 4,384,748%. For comparison, the S&P 500’s return was 31,223%.
Considering that Buffett has been able to average a compound annual gain of 20% for decades, I find it hard to pick a stock other than Berkshire itself. I think investors looking for consistent long-term growth while also achieving a deep degree of portfolio diversification would be best off owning Berkshire stock and letting Buffett’s magic do the rest.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, and Visa. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
Warren Buffett’s safest stock may not be Apple or Coca-Cola. 1 other stock that could be a better buy over the long term was originally published by The Motley Fool
