If you want to invest in the stock market but don't have the time to research individual stocks, it's a good idea to simply invest in an S&P 500 index fund or exchange-traded fund (ETF). The broad-market large-cap index has delivered an average annual return of about 10% since it was created in 1957, and most professional fund managers fail to outperform the index over the long term. That's why John Bogle, the founder of Vanguard and the father of index investing, told investors that instead of aiming to beat the market, they should simply buy the entire market.
However, one stock that has consistently outperformed the S&P 500 is Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B). Warren Buffett took full control of Berkshire Hathaway, which was a struggling textile maker at the time, on May 10, 1965. A $1,000 investment in the stock on that fateful day would be worth nearly $45 million today. That same investment in the S&P 500, with reinvested dividends, would have grown to nearly $339,000.
Image source: Berkshire Hathaway.
Past performance is no guarantee of future results. But if I could only buy and hold one stock for the next few decades, it would still be Berkshire Hathaway for four simple reasons.
1. It's well diversified across evergreen industries
Under Buffett, Berkshire Hathaway liquidated its textile business and acquired a long list of companies in an array of industries -- insurance, energy, railroad, real estate, retail, and consumer staples. Its largest subsidiaries are Geico, BNSF Railway, and Berkshire Hathaway Energy. It also owns well-known consumer brands like Duracell, Fruit of the Loom, and See's Candies.
Most of these companies operate in evergreen businesses. In 2024, Berkshire generated 19% and 29% of its operating earnings, respectively, from its insurance underwriting and insurance investment segments. Those two business lines are well insulated from economic downturns since people and businesses generally don't cancel their insurance policies as a cost-saving measure.
BSNF Railway and Berkshire Hathaway Energy provided 11% and 8% of the conglomerate's operating earnings, respectively, for the year. Those businesses are more cyclical, but they'll keep growing as long as the U.S. economy keeps expanding. As Buffett once said: "The American economy is going to do fine. But it won't do fine every year and every week and every month."
2. It generates plenty of cash for its investment portfolio
Berkshire Hathaway is massive, but its long-term strategy is easy to understand. It aims to generate a lot of cash with its core businesses, and then invest that cash into its closely watched investment portfolio. From the end of 2004 to the close of 2024, the amount of cash and equivalents on Berkshire's books soared from $74.7 billion to $334.2 billion.
Its cash hoard swelled further to $347.7 billion -- or 30% of its entire market cap of $1.16 trillion -- as of the end of the first quarter of 2025. It's storing most of that cash in short-term U.S. Treasuries, and it's actually holding more Treasury bills than the Federal Reserve.
As of this writing, its investment portfolio is worth $277.4 billion, or 24% of its market cap, with publicly disclosed positions in 44 stocks. Its top five holdings are Apple (22%), American Express (15%), Coca-Cola (15%), Bank of America (10%), and Chevron (6%). That portfolio is essentially its own fund which is overseen by Buffett himself -- which makes Berkshire a great alternative to an S&P 500 index fund.
3. It still looks reasonably valued
Buffett prefers to gauge Berkshire's growth based on its operating earnings, which exclude the gains and losses from its stock portfolio. That metric grew from $8.3 billion in 2004 to $47.4 billion in 2024 -- a compound annual rate of 9%.
Berkshire Hathaway trades at 25 times last year's operating earnings. That valuation isn't a screaming bargain -- but its scale, diversification, and reputation as a safe-haven stock justify that slight premium to the market average.
4. Its future leaders should stick to Buffett's playbook
The biggest near-term concern for Berkshire's investors is Buffett's upcoming retirement. Buffett plans to hand the reins over to Greg Abel, the chairman and CEO of Berkshire Energy, in the near future. Abel isn't a celebrated stock picker like Buffett, and he could struggle to prune and refresh Berkshire's portfolio -- even though most of those positions are stable long-term holdings.
However, I think it's doubtful that Abel, who has been with Berkshire for 25 years, will stray too far from Buffett's playbook. So as long as Abel continues to nourish the growth of its cash-rich subsidiaries and conservatively expand its investment portfolio, its business should remain healthy.
Berkshire Hathaway's the ultimate stock to buy, hold, and forget
Berkshire Hathaway isn't an exciting investment, but it's a stock that will probably stay ahead of the S&P 500. That makes it one of the best stocks to buy, hold, and forget for the next few decades.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Leo Sun has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
