Why Every Investor Should Own This Trillion-Dollar Company Right Now

Key Points

• Berkshire Hathaway is about as diversified a company as one can find on the market.

• The conglomerate's long-term success is largely due to the influence of Warren Buffett and Charlie Munger.

• The next generation of leaders at Berkshire Hathaway should uphold the legacy of their predecessors.

• 10 stocks we like better than Berkshire Hathaway ›

People who invest in stocks come from all walks of life and have diverse goals and values and varying levels of risk tolerance and start-up capital. That's why it's hard to come up with a single stock everyone should own. But if I absolutely had to pick one, it would be Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). The Warren Buffett–led conglomerate has many qualities that will appeal to long-term investors. Here is more on this longtime market beater.

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Diversification matters

Berkshire Hathaway has significantly outperformed the market over the long run. True, past performance isn't a guarantee of future results, but if a company has a history of outperforming the market, it's essential to understand why to determine whether it can continue to do so. In Berkshire Hathaway's case, Warren Buffett's leadership and investing philosophy have been central to its success. A company's management team is perhaps the single most crucial factor in its long-term performance.

Buffett and his team, which until recently included the late Charlie Munger, have acquired a range of businesses across various sectors, creating a small economy within a single corporation. Of course, some industries are better represented within Berkshire Hathaway's empire. For instance, the company's insurance operations are a bigger source of revenue than most others. Even so, it's hard to find a company that is more diversified than Berkshire Hathaway.

It owns businesses across sectors including railroad, energy, utilities, apparel, manufacturing, and more.

Exchange-traded funds (ETFs) that track the performance of major indexes are typically excellent buys. They are lower-risk investments that require minimal research compared to investing in individual stocks, and they practically guarantee respectable long-term returns. Berkshire Hathaway is as close as you can get to an ETF in a single corporation. Buffett, widely regarded as the most significant investor of all time, has also made a name for himself through his investment philosophy.

That's why Wall Street closely scrutinizes his moves. The 41 stocks in Berkshire Hathaway's investment portfolio make the company even more diversified. Between them and the company's fully owned subsidiaries, Berkshire Hathaway has at least partial ownership of hundreds of businesses. Berkshire Hathaway's exemplary leadership and diversified business model are great reasons why every investor should consider owning the stock.

The post-Buffett era

Buffett announced he would be stepping down as CEO of Berkshire Hathaway by the end of the year. And his longtime friend and business partner, Charlie Munger, is no longer with us. Can the company still deliver strong returns over the long run? My view is that Berkshire Hathaway will be just fine. Several other people have been in the trenches with Buffett for years.

Greg Abel, the company's future CEO and current head of noninsurance operations, has been with the company for over two decades. Ajit Jain, vice chairman of insurance operations, first joined the company about four decades ago. Todd Combs and Ted Weschler are already responsible for 10% of Berkshire Hathaway's portfolio and have been for years.

These leaders and others share much of Buffett's business acumen and investing philosophy, and they have proved as much through their expert handling of essential parts of the company's operations for a long time. Buffett wouldn't have chosen Abel as his heir otherwise, nor would he have given Jain leadership of the business's all-important insurance operations, or let Combs and Wechsler play around with 10% of the conglomerate's portfolio.

Furthermore, while Buffett and Munger transformed a textile manufacturing company into a major conglomerate, Abel, Jain, and others will inherit this empire already fully formed. A diversified business with a long track record of success and an outstanding management team: That description will still fit Berkshire Hathaway after Buffett retires. And that's why the company can still deliver excellent long-term returns.

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Prosper Junior Bakiny has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.