Let's make this clear from the start: I would never recommend owning just one stock for the long haul.
A proper nest egg needs some variety, either in a carefully assembled basket of diverse stocks or focused on a broad market-tracking exchange-traded fund (ETF). For the sake of argument, however, I could imagine buying some Berkshire Hathaway (BRK.A 0.95%) (BRK.B 1.11%) stock and just letting it roll.
The usual suspects aren't diverse enough for this challenge
I know, I know. You wanted me to double down on Amazon (AMZN 2.77%), whose stock has absolutely crushed the general market in the long run. Or I could have picked Netflix (NFLX -0.72%), the media-streaming pioneer that's created most of my wealth so far and that might join the trillion-dollar market cap club in a few years. Perhaps you expected Nvidia (NVDA 1.26%), with its unmatched five-year returns and huge long-term future in the artificial intelligence (AI) industry.
These stocks sure tick a few of the right boxes, but none of them are as naturally diversified as Berkshire Hathaway. That's really what I'm looking for in a "single stock for all ages."
Why my biggest winners don't make the cut
I own all three of the suggested Berkshire alternatives above, by the way.
Netflix
Netflix was an early name in my portfolio, inspired by fellow Fool Rick Munarriz's in-depth analysis of the company in the mid-2000s. When Netflix went through the Qwikster-branded separation of DVD and streaming services, I doubled down on my investment at a fantastic price. That particular Netflix stake has gained 10,350% in less than 14 years.
But that's just my favorite play on the future of digital media services. I would never dare to make Netflix my only holding, just in case somebody builds a better media-streaming mousetrap.
Amazon
I wish I had pounced on Amazon much earlier, like Motley Fool co-founders Tom and David Gardner did. But I dragged my feet, and watched the online bookstore become an e-commerce buffet with a highly profitable side of cloud computing services. My oldest Amazon investment is only up by 430% since January 2017.
Still, Amazon only operates in a couple of business sectors. The company (and stock) could be vulnerable to a sudden sea change in cloud computing, possibly led by Microsoft's (MSFT 0.58%) Windows Azure. And how well would Amazon's dominant e-commerce business perform if global rivals such as Alibaba (BABA -0.48%) or MercadoLibre (MELI -3.98%) found some traction in the American market? Amazon is not a one-trick pony, but the company should pick up a few more skills before entering this single-stock discussion.
Nvidia
I'm especially worried about Nvidia's long-term tenacity. The early leader in AI accelerator hardware could very well run into a superior alternative in the next few years. The risk only grows larger if you stretch the timeline out over decades.
Rivals like Advanced Micro Devices (AMD 0.46%) and Intel (INTC 0.33%) control tiny slices of the AI chip opportunity so far, but that could change. The next market-defining AI winner could be some upstart I haven't heard of yet. Moreover, leading cloud computing experts such as Microsoft and Amazon already design AI accelerators of their own, hoping to meet their exact needs at a lower cost.
Nvidia's big growth spurt might have a few years left in it. I'm just not convinced that the stock will continue to rise after that. My largest Nvidia purchase has posted a 780% gain since June 2022, but I cashed in on those paper gains and sold most of my Nvidia shares earlier this year. This pony needs to learn a few more tricks, too.
Image source: Getty Images.
Berkshire is the Swiss Army knife of stocks
So diversity sets Berkshire apart from the biggest success stories of this era.
Sure, Warren Buffett's stock-picking and wealth management expertise deserves tons of respect. But he is also known as a great mentor, and many of Berkshire's top-performing picks in recent years were added by Buffett's lieutenants. I expect the company to continue doing well when the Oracle of Omaha retires at the end of 2025.
The stock is kind of like a carefully curated ETF. Berkshire Hathaway owns and operates 68 distinct companies these days. The names range from GEICO car insurance and Duracell batteries to Business Wire information services and the Burlington Northern Santa Fe railroad. Berkshire dabbles in e-commerce (Oriental Trading Company) and clothing (Fruit of the Loom), not to mention home construction (Clayton Homes) and fast food (Dairy Queen). This business list is almost as diverse as the S&P 500 (^GSPC 1.03%) market index.
And that's just Berkshire's in-house brands. The company also owns stock in about 40 public companies. The largest investments include a $60.7 billion stake in Apple (AAPL 1.79%), a $45.1 billion position in American Express (AXP 2.29%), and a $28.5 billion holding of Coca-Cola (KO 0.64%). That's consumer electronics, financial services, and beverage distribution. Apple's gigantic presence may look risky, but the danger looks smaller when you also consider Berkshire's epic collection of fully owned businesses.
Do you see a theme here? I do, but it's not a single industry. Berkshire is all about diversity, shielding the company and its investors against the temporary ups and downs in any one particular industry.
Full disclosure: I don't own Berkshire (yet)
I don't actually own any Berkshire Hathaway stock yet. I get my portfolio diversification kicks in other ways, with several dozen hand-picked stocks and a couple of broad index funds serving this purpose. That's arguably a mistake, since Berkshire's stock tends to outperform the S&P 500 in the long run, and I can't compete with the Buffett team's stock-picking skill.
So if you're starting a new portfolio today, or just looking for an alternative to the common S&P 500 index funds, you should give Berkshire Hathaway a serious look. It's definitely a safer long-term bet than Nvidia, Netflix, or even Amazon.
