There’s not an investor in the world that wouldn’t want to replicate the investing success of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) CEO Warren Buffett. Buffett’s value-oriented investing prowess has earned him a fortune and a position among the most wealthy people on the planet.
It seems like once a week I read a headline about how to invest like Buffett. But there’s good news for all struggling investors. It’s easier than you think to identify Warren Buffett’s top retirement stock. Don’t overthink it. It’s his own company: Berkshire Hathaway.
Buy Like Buffett
When friends or family ask me for stock picks, my standard response is to send them a link to Berkshire’s top holdings. I tell them that “this Buffett guy” seems to have done pretty well for himself picking stocks, from what I’ve heard. Thanks to U.S. market regulations, any money managers with more than $100 million in assets under management must report their holdings publicly once per quarter. These holdings are reported on SEC Form 13F.
For investors looking to copy active money managers that trade in and out of stocks often, this information may not be as helpful. By the time their 13F forms are public, they may have moved on to an entirely different group of stocks. But Buffett once said if investors aren’t comfortable owning a stock for 10 years, they shouldn’t own it for 10 minutes. In other words, when Buffett buys a stock, you can bet he’s in it for the long haul.
The articles about how to invest like Buffett are great for educational purposes. But if you want to invest like Buffett, the easiest thing to do is buy the stocks he actually owns. Problem solved.
Today, Berkshire’s top holdings include stocks like Apple (NASDAQ:AAPL), Coca-Cola (NYSE:KO) and Bank of America (NYSE:BAC).
Buying Berkshire Hathaway Stock
Of course, the easiest way to buy Buffett stocks is to just buy Berkshire shares. Berkshire itself is essentially a Buffett stock exchange-traded fund. Berkshire holds nearly 50 stocks, and the allocations are all exactly to Buffett’s liking. You don’t have to wait until the end of the quarter to reap the benefits of Buffett’s latest ideas. By owning Berkshire Hathaway, you start to profit on Buffett’s latest buys before you even know what they are.
Buffett and Berkshire’s track record over the decades have been remarkably consistent. Buffett didn’t just stumble into that nearly $90 billion fortune by getting lucky. Incredibly, even though Buffett is a value investor and value stocks have lagged in the past decade, Berkshire stock hasn’t. Berkshire Hathaway stock is up 244.2% in the past 10 years compared to just a 190.1% gain by the S&P 500 in the same stretch.
Berkshire’s Secret
Former hedge fund manager Whitney Tilson says the key to Bershire’s strong performance isn’t Apple, Bank of America or Coca-Cola.
“The secret that allows Berkshire Hathaway to deliver returns that would make most hedge-fund managers drool is the investments Buffett makes OUTSIDE the stock market,” Tilson says.
For example, Berkshire financed a private deal to buy Capital Cities/ABC for around $500 million back in 1985. Less than 10 years later, Buffett sold the company to Disney (NYSE:DIS) for $19 billion, 38 times what he paid.
“He’s done private deals like this over and over again — which is a major reason why Berkshire has outperformed nearly every fund manager on the planet over the long term,” Tilson says.
Today, Berkshire’s top private businesses include Geico, Dairy Queen and Duracell. The only way for the average investor to own these companies is to buy Berkshire stock.
Tilson says these private deals make Berkshire the single best retirement stock out there today. He says shares have more than 40% upside from current levels.
Why Berkshire Is Perfect For Retirees
Berkshire is also one of the safest retirement stocks thanks to its balance sheet. It has roughly $128 billion in cash. Buffett has even endured some criticism for not putting some of that money to work. But if the past is any indication, Buffett is simply waiting for the right opportunity to pounce.
Berkshire has Buffett. It has Buffett’s private investments. It has an attractive valuation and serious potential upside. It has the safety of diversification due to its dozens of public and private holdings. And perhaps most importantly, it has one of the most impressive balance sheets in the world. If you’re looking to invest for retirement, there’s simply no better place to start that BRK.B stock.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.
