Investing in U.S. stocks.
It’s something that few Canadian investors think about, but most should.
Studies show that the more widely you diversify, the better the returns you’re likely to get. Historically, U.S. markets have been among the best performing in the world. That’s not guaranteed to be the case going forward, but it is undeniably the case that you should have some U.S. exposure in your portfolio.
When you hear ‘quality U.S. stocks,’ you probably think of high flying AI names like NVIDIA that have been delivering outsized returns in recent years. Those are definitely what the U.S. markets are best known for, but they may not be the best fit for your portfolio. In this article, I explore one U.S. stock that is worth buying and holding for the long term.
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Berkshire Hathaway
Berkshire Hathaway Inc (NYSE:BRK.B) is a name you’re probably familiar with. Warren Buffett’s brainchild, it (especially its stock portfolio) is one of the most talked about companies in the world. Its Chairman and former CEO is often thought of as the greatest investor of all time, and it is one of the biggest companies in the world.
In light of the facts above, you might be a little surprised that I’d recommend Berkshire Hathaway. Berkshire Hathaway is already a giant, and you’ve definitely heard of it – why recommend it now?
There are several reasons
First, the market is clearly in a period of elevated risk, and Berkshire is among the companies best positioned to deal with risky conditions. Among other things, the company has a large U.S. treasury portfolio, worth about $370 billion; a value investing philosophy; and a high degree of diversification in its holdings. These facts combine to make Berkshire a fortress-like oasis of strength in a highly volatile market.
Warren Buffett’s departure
One reason why some may be a little uncomfortable holding Berkshire Hathaway stock today is the fact that Warren Buffett no longer runs the company on a day-to-day basis. Instead, the company is now run by Greg Abel, who has long operated Berkshire Hathaway Energy (formerly Mid-American Energy). Abel is best known for focusing on the details of operations rather than investing in stocks. So, some think that he will not be able to compare to the capital allocation savvy that Buffett brought to Berkshire.
In my opinion this concern is overblown. First, Greg Abel was handpicked for the CEO role by Warren Buffett, who could have picked distinguished investors Ajit Jain or Ted Weschler for the post. He considered him the best of three possible choices. Second, Abel established himself with a strong track record at Berkshire Hathaway. For these reasons, I think that he will do a good job running Berkshire Hathaway.
Foolish bottom line: Berkshire Hathaway
The bottom line on Berkshire Hathaway is that it is one of the best run companies in the world. Its capital allocation is top notch, its reputation is second to none, and its risk management is exceptional. These qualities combine to make BRK.B a stock that all Canadians should consider owning.
