Warren Buffett has owned a lot of stocks during his career, but there’s been one position that’s consistently outperformed.
In the mid-2000s, a former medical student turned portfolio manager named Michael Burry predicted the housing crisis and its economic implications during the Great Recession. In more recent history, billionaires such as Chamath Palihapitiya have emerged as prominent talking heads for markets, politics, and everything in between.
But the investment industry’s “what have you done for me lately?” mentality has me skeptical that Burry or Palihapitiya will remain relevant over the course of the next several decades. That’s a tough thing to do.
I can think of one investor for whom this question doesn’t really apply. Over the course of several decades, Warren Buffett has become one of the most well-known investors on the planet thanks to an unrelenting commitment to simplicity and an aversion to drama and outsize risk.
Let’s take a look at Buffett’s philosophy and assess his portfolio. While the Oracle of Omaha has had a lot of multibaggers over the years, I see one stock as a special opportunity for the long haul.
Breaking down Buffett’s investment philosophy
Buffett’s investment style is rooted in a lot of simple, straightforward philosophies.
For starters, Buffett is a contrarian. To be fair, so is Michael Burry. But unlike Burry, Buffett isn’t one to take short positions or bet against America in times of recession.
Rather, Buffett looks for value opportunities that may be underappreciated or misunderstood. In other words, a specific stock price or valuation multiple may not always tell the entire story about a business.
Time and again, Buffett has taken positions that looked like head-scratchers on the surface. But after a thorough analysis, investors have come to see that he has a knack for identifying companies with strong, consistent cash flow and broad brand appeal.
Image source: The Motley Fool.
Notable Buffett investments
Given the explanation above, it’s probably not surprising to learn that Buffett loves blue chip stocks. While he has dabbled with some growth stocks in emerging areas such as artificial intelligence (AI), the overwhelming majority of his portfolio is concentrated in more mundane businesses across financial services, consumer packaged goods, telecommunications, and energy.
Some of Buffett’s biggest winners over the years include Apple and Coca-Cola. Unlike many technology companies, Apple is unique because it fits squarely with Buffett’s criteria of looking for growth but not at the expense of consistent profits.
Even though Buffett hasn’t even owned shares of Apple for a decade, it is his largest position right now — and that’s even after offloading a good chunk of the position and re-investing profits into Treasury Bills.
Regarding Coca-Cola, Buffett has held the stock for decades. While this has led to significant price appreciation in his position, the real sweetener for Buffett is Coca-Cola’s generous and reliable dividend.
Which Warren Buffett stock do I think is the best long-term option?
My top Warren Buffett stock is Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.96%), the holding company for all of his positions.
Even though companies such as Apple and Coca-Cola are pretty safe choices for investors, no one stock is immune to macrothemes such as economic slowdowns or changes in monetary policy. These can have ripple effects throughout the stock market regardless of industry sector or specific companies.
Investing in Berkshire Hathaway inherently provides exposure to a number of high-quality companies across different industries. In addition to Apple and Coca-Cola, some of Berkshire’s largest positions include American Express, Occidental Petroleum, Bank of America, Chevron, and Visa.
The Berkshire portfolio provides investors with a level of diversification akin to the S&P 500. But the added bonus is that you also get the intangible qualities of Buffett’s mindset along with unparalleled expertise in his portfolio-management team featuring Ted Weschler and Todd Combs.
Berkshire’s track record speaks for itself. From 1964 to 2023, Berkshire generated an overall gain of 4,384,748%. By comparison, the S&P 500’s gain was 31,223%.
Considering Buffett has been able to produce compounded annual gains of 20% on average for several decades, I’m hard-pressed to pick another stock over Berkshire itself. I think investors looking for consistent growth over a long-term time horizon while also achieving a deep level of portfolio diversification are best off owning Berkshire stock and letting Buffett’s magic do the rest.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, and Visa. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
