What are the best stocks to buy right now? Maybe you should buy financials like Wells Fargo as a play on the continued economic recovery, or oil companies like ExxonMobil while prices remain depressed. Or maybe your money should be used to buy high-quality blue-chip stocks like Coca-Cola or Procter and Gamble. Maybe you're worried about a correction and should buy stocks that tend to do well in bad times, like Wal-Mart.
Better yet, why not make the decision easy and invest in a company that owns all of the above and more? Enter Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B). Buying shares of Berkshire is like buying a rock-solid stock portfolio and some great businesses all at once. Here's why Berkshire Hathaway deserves serious consideration for any well-rounded portfolio.
Basically, Berkshire Hathaway is a great company because its business model and management are without equal.
Berkshire's primary business is insurance, which it conducts through wholly owned subsidiaries such as Geico. Then, using some of the money collected as insurance premiums, Berkshire invests in other businesses or buys stock in publicly traded companies that management thinks will deliver maximum returns to shareholders.
As far as management goes, I can't think of anyone off the top of my head whom I'd trust with my money more than Warren Buffett. And for those concerned about Buffett's age, know that his top two stock-pickers, Todd Combs and Ted Weschler, are rock stars. Their picks have been beating the market handily, and Buffett himself has said, "They have made Berkshire billions already that we wouldn't have otherwise made."
A great investment portfolio all in one stock
When investing in Berkshire Hathaway, you aren't just buying shares in one business. You're buying an entire portfolio of companies and stocks that were hand-picked by the best minds in investing. Berkshire is the only way to get a piece of great companies such as Geico, The Pampered Chef, NetJets, and Duracell, to name just a few. In total, Berkshire has about 55 subsidiary companies, many of them well-known national businesses.
And the company's common-stock portfolio includes some of the most dominant companies in America. Just look at some of the stocks it owns. Does this not look like a top-notch collection of dividend stocks that any investor would be happy to own?
|American Express||Goldman Sachs||National Oilwell Varco||Visa|
|ConocoPhillips||IBM||Procter & Gamble||Verizon|
|Costco||Johnson & Johnson||Phillips 66||Wells Fargo|
|General Motors||Mastercard||US Bancorp||ExxonMobil|
The performance speaks for itself
Perhaps the best thing about investing in Berkshire is that it's a defensive stock that delivers market-crushing performance over the long run.
Don't be discouraged that Berkshire tends to underperform the S&P in years when the market is exceptionally strong. Buffett realizes that it's not about the good years. In fact, Berkshire has underperformed the S&P in four out of the past five years.
What makes the biggest difference in long-term performance is how a company does when the market is struggling, and the main reason is that it's tougher to overcome a loss than it is to erase a big gain. Consider that a stock that loses 33% needs to gain 50% just to get back to breakeven, so when you avoid big losses, you don't have to worry as much about outperforming every year.
And Berkshire specializes in holding on to its money. In fact, the S&P has had 11 negative years over the past half-century, and Berkshire outperformed the market in every single one of them. This is the main reason Berkshire has managed to average a 19.7% annual gain during that time period. While past performance doesn't guarantee future results, this shows that Berkshire has a consistently winning formula for success.
Not only is an investment in Berkshire Hathaway a great way to minimize your downside risk while producing great long-term performance, but it does the hard work for you, letting some of the greatest minds in the business choose your investments.
Matthew Frankel owns shares of Berkshire Hathaway. The Motley Fool recommends American Express, Berkshire Hathaway, Coca-Cola, Costco Wholesale, General Motors, Goldman Sachs, Johnson & Johnson, MasterCard, National Oilwell Varco, Procter & Gamble, United Parcel Service, Verizon Communications, Visa, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, Costco Wholesale, General Electric Company, International Business Machines, Johnson & Johnson, MasterCard, National Oilwell Varco, Visa, and Wells Fargo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.