Throughout the mid-2000s, a former medical student turned portfolio manager named Michael Burry predicted the housing crisis and its economic implications throughout the Great Recession. In additional moderen history, billionaires comparable to Chamath Palihapitiya have emerged as distinguished talking heads for markets, politics, and each part in between.
Nevertheless the investment industry’s “what have you ever ever done for me recently?” mentality has me skeptical that Burry or Palihapitiya will remain relevant over the course of the next several a few years. That may be a tricky thing to do.
I can consider one investor for whom this question doesn’t really apply. Over the course of several a few years, Warren Buffett has become one in all the vital well-known investors on the planet as a result of an unrelenting commitment to simplicity and an aversion to drama and outsize risk.
Let’s take a have a have a look at Buffett’s philosophy and assess his portfolio. While the Oracle of Omaha has had a complete lot of multibaggers through the years, I see one stock as a special opportunity for the long haul.
Breaking down Buffett’s investment philosophy
Buffett’s investment style is rooted in a complete lot of easy, straightforward philosophies.
For starters, Buffett is a contrarian. To be fair, so is Michael Burry. But unlike Burry, Buffett is just not one to take short positions or bet against America in times of recession.
Moderately, Buffett looks for value opportunities which could also be underappreciated or misunderstood. In other words, a particular stock price or valuation multiple may not on a regular basis tell your complete story a couple of business.
Repeatedly, Buffett has taken positions that looked like head-scratchers on the surface. But after a radical evaluation, investors have come to see that he has a knack for identifying firms with strong, consistent money flow and broad brand appeal.
Notable Buffett investments
Given the explanation above, it’s probably not surprising to learn that Buffett loves blue chip stocks. While he has dabbled with some growth stocks in emerging areas comparable to artificial intelligence (AI), the overwhelming majority of his portfolio is concentrated in additional mundane businesses across financial services, consumer packaged goods, telecommunications, and energy.
Just a few of Buffett’s biggest winners through the years include Apple and Coca-Cola. Unlike many technology firms, Apple is exclusive because it matches squarely with Buffett’s criteria of looking out for growth but not on the expense of consistent profits.
Although Buffett hasn’t even owned shares of Apple for a decade, it’s his largest position without delay — and that’s even after offloading an outstanding chunk of the position and re-investing profits into Treasury Bills.
Regarding Coca-Cola, Buffett has held the stock for a few years. While this has led to significant price appreciation in his position, the actual sweetener for Buffett is Coca-Cola’s generous and reliable dividend.
Which Warren Buffett stock do I feel is essentially the most effective long-term option?
My top Warren Buffett stock is Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the holding company for all of his positions.
Although firms comparable to Apple and Coca-Cola are pretty secure decisions for investors, no person stock is proof against macrothemes comparable to economic slowdowns or changes in monetary policy. These can have ripple effects throughout the stock market irrespective of industry sector or specific firms.
Investing in Berkshire Hathaway inherently provides exposure to a whole lot of high-quality firms across different industries. Together with Apple and Coca-Cola, a couple of of Berkshire’s largest positions include American Express, Occidental Petroleum, Bank of America, Chevron, and Visa.
The Berkshire portfolio provides investors with a level of diversification akin to the S&P 500. Nevertheless the added bonus is that you simply moreover may get the intangible qualities of Buffett’s mindset along with unparalleled expertise in his portfolio-management team featuring Ted Weschler and Todd Combs.
Berkshire’s track record speaks for itself. From 1964 to 2023, Berkshire generated an overall gain of 4,384,748%. By comparison, the S&P 500’s gain was 31,223%.
Considering Buffett has been able to produce compounded annual gains of 20% on average for several a few years, I’m hard-pressed to pick one other stock over Berkshire itself. I feel investors looking out for consistent growth over a long-term time horizon while also achieving a deep level of portfolio diversification are best off owning Berkshire stock and letting Buffett’s magic do the rest.
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Bank of America is an promoting partner of The Ascent, a Motley Idiot company. American Express is an promoting partner of The Ascent, a Motley Idiot company. Adam Spatacco has positions in Apple. The Motley Idiot has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, and Visa. The Motley Idiot recommends Occidental Petroleum. The Motley Idiot has a disclosure policy.
Warren Buffett’s Safest Stock Might Not Be Apple or Coca-Cola. 1 Other Stock That Could Be a Higher Buy throughout the Long Run. was originally published by The Motley Idiot