It's a fun thought exercise to imagine what stock you'd buy if you could only buy one. Several candidates come to my mind, such as Amazon.com and Apple. But I think my best answer has to be this one stock: Berkshire Hathaway (BRK.A 0.48%) (BRK.B 0.09%).
If it doesn't ring a bell, know that it's been helmed for more than 50 years by a fellow named Warren Buffett -- and it's my third-largest holding, making up a meaningful chunk of my overall portfolio's value.
Meet Berkshire Hathaway
If you're not familiar with Berkshire Hathaway, know that it's huge -- it was recently the 10th largest company in the world (by market value). According to its 2019 annual report, as of the end of 2019, the company employed about 391,500 people. See? Big.
Here are lots of other things to know about the company, many of which will make it clear why I'd want to own so much of it.
Berkshire Hathaway has been a powerful grower for a long time. From 1965 through 2019, its stock price grew at an annual compounded rate of 20.3% -- enough to turn an initial $10,000 investment into more than $210 million! (Understand, though, that that's a very long-term average, including many early years when it was able to grow more briskly. I expect, as Buffett has suggested, that future growth rates won't be nearly as heady.)
Berkshire Hathaway is very much an insurance and energy company these days, and those are very defensive industries: No matter what the economy is doing, people and companies are likely going to continue paying for power and protection. That alone makes it a relatively safe stock.
Over the years, Warren Buffett has built Berkshire up by buying many companies outright and investing heavily in the stock of others. Its subsidiaries include Benjamin Moore, Brooks, International Dairy Queen, Johns Manville, Justin Brands, McLane, Business Wire, Clayton Homes, Forest River, Fruit of the Loom, GEICO, Nebraska Furniture Mart, NetJets, Pampered Chef, See's Candies, Shaw Industries, and the entire BNSF railroad. Its top stock holdings include Apple, Coca-Cola, Bank of America, and American Express.
Buffett recently turned 90, so it's clear that he probably doesn't have several more decades of leadership in him (though he's still in fine form). I'm not worried, though, because years ago he recruited two excellent investors who have been given increasingly large portions of the company's cash to invest. These lieutenants, Ted Weschler and Todd Combs, seem exceptionally talented, and note that there are two of them, as well. Should something happen to one, there will still be the other. These guys are the reason that Berkshire has such an immense stake in stocks, such as Apple, that Buffett long avoided as they were out of his "circle of competence." (Indeed, Apple recently made up some 45% of Berkshire's invested assets.)
Solid succession plans
In fact, Berkshire is full of much talent. When it comes to who will succeed Buffett leading the company, he has explained that not only are Weschler and Combs on board for investing, but his son Howard is likely to be in charge of maintaining the company culture, and for the top management job, he has given his board of directors instructions as to who should succeed him. It's widely thought that Greg Abel, who oversees Berkshire's energy businesses, is a top candidate, along with Ajit Jain, who oversees its insurance businesses.
Beautiful business model
The Berkshire Hathaway business model is another draw for me, as it's so beautiful: The company is a conglomerate of many whole businesses that each (for the most part) generate cash -- sometimes lots of it. As the cash comes rolling in continuously, Buffett and/or his lieutenants can put it to work building even more value for the company: The money can be used to buy additional companies, or to invest in ones Berkshire already owns, such as, perhaps, if the railroad needs a capital infusion for more rail cars. It can also be used to buy more stock in favored companies -- including Berkshire itself, as Buffett has spent billions on stock buybacks recently -- and it also often just piles up, while Buffett waits for a wonderful enormous opportunity. Berkshire doesn't pay a dividend yet, as Buffett still hopes to find effective investments for excess cash. But whenever those possibilities run out, expect dividend payments to follow.
Those are just some of the reasons why I'm happy to own so much of Berkshire Hathaway in my portfolio. I know it's not likely to grow as rapidly as, say, Amazon.com or Apple will in coming decades, but the future of its various holdings seems more clear, too: 10, 20, 30 years from now, people and businesses will likely still be buying energy, insurance, furniture, homes, paint, candy, jewelry, shoes, ice cream, underwear, and insulation, among many other things.
Having Berkshire Hathaway in your portfolio can help you sleep well at night.