Recently, a report disclosed that Berkshire Hathaway, the firm established by Warren Buffett, has a staggering 67% of its assets concentrated in just five stocks. The question arises: should I replicate this strategy? Personally, I would say no. Here’s why.
Let’s look closely at these five brands.
| stock | Recent market value of stocks | % of Berkshire Portfolio |
|---|---|---|
| Apple | $57.8 billion | 21.99% |
| American Express | $45.9 billion | 17.43% |
| Coca-Cola | $30.4 billion | 11.56% |
| Bank of America | $25 billion | 9.52% |
| Chevron | $17.5 billion | 6.64% |
Data source: WhaleWisdom.com, as of June 3.
There are a few reasons why mimicking Berkshire might not be a wise move.
- You might be unfamiliar with the companies in question. In that case, it doesn’t make sense to invest your hard-earned money without sufficient knowledge.
- It’s tough to gauge whether Berkshire is buying more or selling off shares in these firms in real-time. So, you could end up investing in a company that they’re actually moving away from.
- Having just five stocks means a lot of concentration—too many eggs in one basket, as they say. This might not concern seasoned investors like Buffett or his successors. But for ordinary investors, this could pose significant risk.
- It’s also worth noting that Berkshire’s stock portfolio may not perform as well post-Buffett’s tenure.
Alternatively, you could opt to invest directly in Berkshire Hathaway itself. That way, you’d be co-owning dozens of subsidiaries, like GEICO, Dairy Queen, and others. Berkshire has also recently boasted close to $400 billion in cash, so more investments may be on the horizon.
Should you buy Berkshire Hathaway stock now?
Before making any decisions about buying Berkshire, consider this:
Analysts from a certain investment advisory have identified ten stocks that they believe present long-term growth potential, and interestingly, Berkshire Hathaway isn’t one of them. These picks are framed for impressive returns in the coming years.
