The Smartest Trillion-Dollar Stock to Buy With $1,000 and Hold Forever

Only a few companies have reached a market cap of $1 trillion. Those that have are at the top of their industries and typically provide returns that outperform the market. While there are many candidates to consider for investment, one of the standout options is Berkshire Hathaway (BRK.A 0.49%) (BRK.B 0.54%), led by the renowned investor Warren Buffett. With its Class B shares trading around $529, Berkshire Hathaway emerges as an excellent stock to buy with $1,000 and hold indefinitely. Here’s why.

Almost Like an Index Fund

Let’s begin with a little story. Back in 2007, Buffett made a wager of $1 million that an S&P 500 index fund would outperform a selection of hedge funds over a decade, taking into account the fees associated with those hedge funds. The hedge fund manager Ted Seides accepted the challenge—and ultimately lost.

The lesson here is that beating major stock indexes, like the S&P 500, can be quite difficult because these indexes encompass a wide range of companies across numerous sectors. Some are valued over $1 trillion, while others are significantly smaller. When economic challenges arise, different companies are affected in various ways; if some struggle, others may thrive. For most investors looking at single stocks, diversifying through an exchange-traded fund (ETF) that tracks the S&P 500 or investing in Berkshire Hathaway offers a better approach.

Berkshire Hathaway has a diverse portfolio comprising subsidiaries from a multitude of industries. Additionally, its collection of invested stocks provides even more diversification. While it may not be as broadly diversified as the S&P 500, there are very few companies that come as close, particularly among those with a trillion-dollar market cap. This gives Berkshire Hathaway a unique competitive advantage.

Strong Leadership as a Key Indicator

While some hedge funds do occasionally outperform the market, the managers who achieve this are highly respected, and many of them have become billionaires. This highlights that the leadership of a company is often a crucial indicator of its potential for success, even for hedge funds.

In terms of successful leadership, few compare to Warren Buffett. The Oracle of Omaha has consistently outperformed the market for decades, and the long-term performance of Berkshire Hathaway significantly surpasses that of the S&P 500.

But a key concern arises given Buffett’s advanced age; he won’t be around forever, which is relevant for the long-term holding strategy we’re considering. What will happen to Berkshire Hathaway once Buffett steps down? Fortunately, the indicators suggest that the company will maintain the principles and vision that have guided its success.

Great leaders prioritize developing the next generation. Even without knowing the specifics of Berkshire Hathaway’s organizational structure or who Buffett has selected as his successor, it’s likely that he has mentored his team for this transition. More specifically, we know that Greg Abel, the vice-chairperson in charge of Berkshire's non-insurance operations, is poised to take over.

Buffett has created a culture within Berkshire Hathaway centered around his successful investing philosophy and key factors contributing to that success. It’s likely that he has shared his knowledge with more than one individual. Those who have ascended through the ranks of the company likely embody the teachings of the Oracle of Omaha, ensuring that Buffett’s legacy continues long after he is no longer at the helm.

Berkshire Hathaway stands as a well-established, highly profitable company with strong leadership and invaluable intangible assets, positioning it for continued success in the years to come. Therefore, for those looking to invest in a single company with a market cap exceeding $1 trillion, Berkshire Hathaway could very well be the ultimate choice.

No position is held in any of the stocks mentioned. The author favorably views and recommends Berkshire Hathaway.

investment, leadership, diversification