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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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.
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.
