According to the latest report, the stock portfolio of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), the company Warren Buffett built, had 67% of its assets in just five stocks. Should you copy that? My answer would be no. Permit me to explain why.
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First, though, here are the five stocks:
Stock | Recent Market Value of Stake | % 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 | $25.0 billion | 9.52% |
Chevron | $17.5 billion | 6.64% |
Data source: WhaleWisdom.com, as of June 3.
There are several reasons you might not want to copy Berkshire:
You might know little about the companies in question, in which case you should not devote your hard-earned dollars to them.
We never learn in real time whether Berkshire has been adding to or shrinking — or eliminating — its position in any company. So you might buy shares of a company that you soon learn Berkshire has been selling.
If you own only the five stocks, that’s a lot of concentration — you’ll have too many eggs in one basket. That can be less problematic for expert investors like Buffett and his successor investors, such as the new CEO, Greg Abel, and Ted Weschler, who has been investing billions for Berkshire for many years now. But for us regular investors, that’s risky.
It’s possible that Berkshire’s stock portfolio might not perform as well in the future as it did under Buffett.
Of course, you might invest in all the stocks in Berkshire’s portfolio in one easy move — by investing in Berkshire Hathaway itself. You’ll then be a part owner of dozens of wholly owned subsidiaries such as GEICO, Benjamin Moore, NetJets, Dairy Queen, McLane, and the entire BNSF railroad, along with lots of stock positions in various companies. Berkshire recently had close to $400 billion in cash, so further additions are likely in the coming years. Even Berkshire is buying Berkshire shares.
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