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

A few companies have reached a market cap of $1 trillion. All of these companies are leaders in their industries and tend to provide impressive returns. While investing in any of these companies can be justified, one of the best choices might be the conglomerate Berkshire Hathaway (BRK.A / BRK.B), which is led by the renowned investor Warren Buffett. Currently, the class B shares are trading at around $529 each, making it a smart investment option with $1,000 to buy and hold indefinitely. Here’s why.

The Ultimate Index Fund Alternative

Let's reflect on a story. In 2007, Warren Buffett made a wager of $1 million that an S&P 500 index fund would outperform a collection of hedge funds over a ten-year period, factoring in the associated hedge fund fees. Ted Seides, a hedge fund manager, accepted the challenge but ultimately lost the bet.

The takeaway from this story is that beating major market indexes like the S&P 500 is a tough feat. These indexes are well-diversified, representing companies of different sizes and sectors. Some companies are valued over $1 trillion, while others may be less than $10 billion. During economic downturns, different industries react in various ways. Therefore, while some companies may struggle, others will thrive. For individual stock investors, it's often wiser to pool investments through an exchange-traded fund (ETF) that tracks the S&P 500 or to buy shares in Berkshire Hathaway.

Berkshire Hathaway owns a wide range of subsidiaries from various sectors, further enhancing its diversification with a substantial portfolio of investments. While it doesn't equal the S&P 500 in diversification, finding a single company that comes close is rare, and no other trillion-dollar company matches that level of diversification.

Strong Leadership Equals Strong Success

Occasionally, hedge funds may outperform the market, and the managers who achieve this are often celebrated within the finance community, with many becoming billionaires. This highlights the importance of effective leadership in determining a company's success, even in hedge funds.

When considering who leads a company toward outperformance, it’s difficult to find someone better than Warren Buffett. Known as the Oracle of Omaha, Buffett has managed to outperform the market consistently over the decades. The long-term returns realized by Berkshire Hathaway have far surpassed those of the S&P 500.

Though very few companies have consistently beat the market, and fewer still with the same leader, it's essential to consider the future of Berkshire Hathaway given that Buffett is now in his 90s. One might wonder how the company will fare once he is no longer at the helm. Signs indicate that Berkshire Hathaway will continue its successful approach even in a post-Buffett era.

A truly great leader also prioritizes mentoring the next generation. Even without intimate knowledge of Berkshire’s internal dynamics or Buffett's plans for succession, it's reasonable to believe he has cultivated a solid successor. In fact, it has been confirmed that Greg Abel, the vice-chairman overseeing Berkshire's non-insurance operations, is set to succeed Buffett.

Furthermore, Buffett has established a culture within Berkshire centered around his principles and the strategies that spurred the company’s success. He has likely imparted invaluable lessons to multiple individuals, ensuring that key leaders who have advanced within the company embody his investment philosophy. After Buffett's tenure, it won't hinge solely on one individual, but rather a team of experienced leaders who have absorbed his wisdom.

Overall, Berkshire Hathaway stands as a well-established, diversely profitable company equipped with competent leadership and invaluable insights, factors that are likely to drive its success for many years to come. Thus, if you're considering an investment in just one trillion-dollar company, Berkshire Hathaway could be your best option.

Investment, Leadership, Diversification