Let's try a little thought experiment. What if I could only buy a single stock today and had to hold it forever?
What ticker could stand up to the immense pressure? I'd need a business with the fortitude to stay relevant for decades. It should operate across many different fields and sectors, giving my single-ticker portfolio some semblance of diversification. And of course, I would demand a company with world-class leaders. That team will be trusted with my entire hypothetical nest egg, after all.
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Index funds don't count and tech stocks are too narrowly focused
It would be a cop-out to pick an index fund. An exchange-traded fund tracking the S&P 500(SNPINDEX: ^GSPC) market index would absolutely fit the bill with instant diversification and basically eternal staying power. It also acts like a single 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 stock. Therefore, it doesn't comply with the rules of my silly thought experiment.
At first, I considered a couple of sector-straddling tech giants. Amazon(NASDAQ: AMZN) would give me exposure to e-commerce, physical retail stores, artificial intelligence (AI) and cloud computing, shipping services, and more. Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) has a heavy focus on online search and advertising, supported by digital video platforms, Android's mobile computing, a fledgling robo-taxi service, and so on. Both companies look prepared to stay in business 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 offer a limited amount of diversification, far from the immediate safety provided by a proper index fund.
That requirement narrows down my universe of possible stock picks dramatically. In the end, there's only one company that can meet 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.
Berkshire Hathaway's diverse portfolio
First and foremost, Berkshire's diverse business portfolio is legendary. It's an insurance company at heart, featuring the GEICO car insurance giant and 13 more wholly owned insurance brands. But the company also owns Duracell batteries, the BNSF railway, Kraft Heinz in your fridge and Dairy Queen for takeout, and much, much more. I counted nearly 70 brands on Berkshire's list of companies under its 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 an Apple(NASDAQ: AAPL) investment currently worth about $70.5 billion. 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's a very generous sprinkling of other operations here. This isn't quite a perfectly sector-spanning snapshot of the economy, but I dare you to find a closer approximation.
Image Source: The Motley Fool.
Berkshire's leadership
A company is only as good as its leadership, and Berkshire Hathaway is led by master investor Warren Buffett. Below that unbeatable name at the top, Berkshire gives free rein to each business unit's own management team.
Buffett famously prefers to invest in businesses that are so simple, a ham sandwich could run them effectively. And he still insists on letting top-quality leaders run these foolproof businesses. That's an extra layer of safety, insulating Berkshire and its investors from business operation risks.
It's understandable if you worry about what might happen when Warren Buffett isn't directing the masterful Berkshire Hathaway business anymore. Longtime business partner and Berkshire vice chairman Charlie Munger passed away a year ago at the age of 99, and Buffett is only a few years younger. Berkshire Hathaway won't be a "Buffett business" for decades. So what happens when the legendary investor steps down?
Honestly, I don't expect any major 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 in the long haul. For example, Todd Combs and Ted Weschler reportedly led the purchase of Apple stock in 2016. That purchase surely had Buffett's and/or Munger's blessings, but it wasn't their decision.
Long story short: Berkshire Hathaway has a deep bench of top-notch fund managers. The company might lose a step when Buffett walks away, but the company should do just fine in the decades ahead.
So where does this little thought experiment lead? Straight to the doorstep of Berkshire Hathaway. With its hand in everything from insurance to ice cream under the steady hand of an investing dream team, Berkshire is your best bet for a "forever stock." Sure, nothing's 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 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, an executive 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 has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
