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warren buffet said in 2009 that if he were to put all of his net worth into one stock, it would be Wells Fargo. It got me thinking about what stock I would put 100% of my net worth in, if I had to.
Of course, I don’t have to invest everything in a single stock and I have no intention of doing so. But I think it’s always worth thinking about which title I would choose, if I had to.
There are a few worthy suitors for me. But at the end of the day, the only real choice for me is Berkshire Hathaway (NYSE: BRK.B).
Above all, I think Berkshire is a company I can relate to. I also think he has a very predictable future.
Top of my list of requirements was an easy to understand company. Obviously, it might be different for different people, but I think I can relate to Buffett’s society pretty well.
Much of it has to do with Berkshire Hathaway shareholder meetings that are available to listen in. I think there’s a lot of good information to take from them about how the company works.
Berkshire Hathaway is a collection of companies. He brings in money from his Insurance operations and invests part of it in other companies.
There are two keys to this strategy. The first is to be careful not to lose money when writing insurance policies and the second is to make good investments.
Businesses are never entirely predictable. But I think Berkshire Hathaway is the one I can predict reasonably well.
In my view, a recession remains the biggest risk to Berkshire Hathaway’s business. But I think his various operations should do well over time.
Indeed, the vast majority of the company’s profits come from industries that are unlikely to experience significant disruption. These are insurance, railways and energy.
About 22% of the profits come from the company’s railway activities. It is a business well protected by regulation, which means it is unlikely to be disrupted by competitors.
Insurance underwriting provides approximately 19% of Berkshire’s operating income, which is dominated by auto insurance. As needed for pilots, I think it should remain stable.
Berkshire’s energy business provides an additional 9% of revenue. Since it is another regulated utility company, I think its future is quite predictable compared to other companies.
A title to be all-in?
When Buffett said he would put 100% of his net worth in Wells Fargo, the stock was below $10 per share. Today the stock is trading at over $45 a share and Berkshire Hathaway has sold its entire stake.
Going all-in on any stock is risky. And while Berkshire Hathaway stocks make up a big chunk of my portfolio, I’m not going to invest all of my net worth there.