There are many stocks investors often buy with the intention of holding onto forever, but Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) could be the greatest "forever stock" of them all. In this Fool Live video clip, recorded on Nov. 15, Fool.com contributors Matt Frankel, Jason Hall, and Danny Vena discuss Berkshire Hathaway's business and why it could be a great stock to buy and hold for decades.
Matt Frankel: I mean, what can we say about Berkshire? I can spend an hour just explaining all of their different businesses. Berkshire has over 60 of them. At its core, Berkshire built its business as an insurance company. When Buffett took over, it was a textile company, but he never wanted to be in the textile business. He started buying up insurance businesses, most notably, GEICO is a Berkshire subsidiary. Their reinsurance business is absolutely massive.
The idea was that these insurance businesses were required to hold a lot of capital. In the meantime, when you pay your auto insurance bill to GEICO, they hold onto that money until they pay out as claims. Buffett's idea was, well, instead of just putting this to the Treasury bonds like most insurance companies do, why not use that money while it's sitting on the books to invest? He started buying adjacent businesses and started investing in the stock market. Today, Berkshire has a collection of over 60 businesses. I can name a few off the top of my head. Berkshire owns Duracell. They own Fruit of the Loom, to name a couple of the consumer-facing brands. They own Pampered Chef. They own NetJets, Dairy Queen. I mean, we can all name our favorite Berkshire subsidiaries. There's a ton of them.
Danny Vena: See's Candy.
Frankel: See's Candy, there you go.
Jason Hall: Brooks, the shoe company.
Frankel: We wore Brooks running shoes this morning.
Hall: There you go, me too.
Frankel: They are the best running shoes you could buy. There you go -- Danny has one on right now. I have a collection of a lot of brands. A lot aren't consumer-facing. They have the Berkshire Hathaway real estate brand that's really expanded big in the past few years. Clayton Homes, another big brand of theirs. We can go on and on and on naming Berkshire's brands. Then they have their stock portfolio that has about a little over 40 stock positions in it. But most of the equity is tied up in a few names. A lot of bank stocks in there -- Bank of America is one that's really good.
Hall: Apple is their largest holding, so there's that.
Frankel: There's a whole lot of really great stock positions that he buys at what he perceives as less than their intrinsic value with the hopes of them outperforming the market over time. He's using other people's money to do it because of that insurance float is the idea there. To say Berkshire's outperformed the market over time would be like saying Microsoft made some pretty nice software.
Frankel: It just doesn't do it justice. The total return for Berkshire since Buffett took over 1965 is over 2,000,000%. Imagine getting in on that from the beginning. That's why Jason likes Boston Omaha so much because that's where that's going.
Hall: Entirely. The bear case here -- it's been a big underperformer the past decade. We know that and that it has gotten more complex. On so many different businesses at this point, maybe is it elevator music and I think that's maybe the upside risk. But there are a few businesses that have a lower floor. Just its ability to just continually pumping out cash flow, one business is weak, another one's going to be stronger. I think that utility subsidiary, the energy opportunity in renewables, is going to drive the business for the next 15 years. Incredible cash flows are going to come out of that. Go ahead, Danny.
Vena: I was going to say, I would've even voted it higher, but for me, the biggest risk is whether or not they can continue along the same line after Buffett cedes the helm.
Hall: Yeah, there's uncertainty there. I think Weschler and Combs are going to be good capital allocators, but there's a lot of culture that's based on Buffett, there's no doubt about that.