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Many investors closely follow Warren Buffett's trades in Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) portfolio of 44 stocks for fresh investment ideas. After all, Buffett is one of the most successful stock pickers in the world, and a stock's inclusion in Berkshire's portfolio suggests it's a reliable long-term investment.
But over the past year, Berkshire has sold a lot of its top stocks -- including portions of Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC) positions -- while boosting its cash and short-term U.S. Treasury bill holdings to record levels. Those cautious moves suggested that Buffett is expecting the market to pull back from its all-time highs.
So if you're following the Oracle of Omaha right now, you might not be eager to buy too many stocks. However, another strategy would be to simply invest in Berkshire Hathaway -- which might be the best Warren Buffett stock to buy with a modest $1,000 right now.
Why is Berkshire Hathaway the best Buffett stock to buy?
Berkshire Hathaway was a struggling textile maker when it was taken over by a young Warren Buffett's investment fund on May 10, 1965. After Buffett took control, the company liquidated its textile business; acquired a long list of insurance, railroad, and energy companies; and expanded into other markets.
It now owns well-known brands like GEICO, BNSF Railway, Dairy Queen, Fruit of the Loom, Duracell, Acme Brick, and See's Candies. Those companies generate a steady flow of cash to expand its investment portfolio, which is now worth $299 billion.
From 1965 to 2023, Berkshire Hathaway expanded its net earnings at a compound annual growth rate (CAGR) of 20% from $2 million to $96.2 billion. A $1,000 investment in the company on the day Buffett took the helm would be worth $2.48 million today. The same investment in the S&P 500 would only have grown to about $68,200.
Buffett's stable expansion of its core cash-generating businesses and shrewd investments in individual stocks enabled it to consistently beat the market. So for many decades, it made sense to simply buy and hold Berkshire's stock.
But can Berkshire keep beating the market without Buffett?
Berkshire Hathaway seems like an evergreen investment as long as Buffett remains in charge, but the 94-year-old chairman and CEO plans to hand the reins over to Greg Abel, chairman and CEO of Berkshire Energy, in the near future. Abel isn't a celebrated stock picker like Buffett, and it's unclear what will happen to Berkshire's closely watched investment portfolio once he takes over.