Berkshire Hathaway, Mr. Buffett's primary investment vehicle, has investments in 56 publicly traded companies. Yet, just one (Apple) makes up a massive 51% of its holdings by market value. Another seven make up an additional 34%, for a total of 89% (see below).
So, Berkshire is essentially a proxy for Apple, plus a very, very few more stocks. OK, so Mr. Buffett is not bound by the usual rules for portfolio diversification... but still... WHY has he decided to turn Berkshire into such an incredibly NON-diversified investment vehicle?
Honestly, I don't understand it. Can any reader please comment?
Thanks!
If I dun misremember, Buffet once said that diversified portfolios can only provide average performances... if you want to beat the market, you need well selected, concentrated portfolios...
ReplyDeleteImagine AAPL loses half of its value for some reason, it would wipe out Berkshire Hathaway's record returns in previous decades.
ReplyDeleteCathie Wood ran a wildly successful ETF until it blew up spectacularly and investors of her fund suffered a net loss since inception.
even the bible has investment advice. =)
DeleteEcclesiastes 11:1-6 Amplified Bible (AMP)
Cast your bread on the surface of the waters, [be diligently active, make thoughtful decisions], for you will find it after many days. Give a portion to seven, or even [divide it] to eight, for you do not know what misfortune may occur on the earth.
Apple has all the characteristics that Mr. Buffett likes, except one: strong brand name and repeat customers/brand loyalty - just like Coke and Gillette, also figuring in his portfolio. BUT.. it certainly isn't undervalued by any stretch of the imagination. And.. you know... there's LOTS of competition revving up over in Xiaomi. Dunno, but somehow it looks to me like a repeat of the Boeing monopoly coming to an end back when Airbus showed up...
ReplyDeleteApple's strength lies in its security. The apple ecosystem is fully under Apple's control, i.e. hacking / malware are more difficult / often impossible. This cannot be replicated by the Android systems that other phones are based on.
DeleteFrom that perspective, Apple has no real competition... at least not in the foreseeable future.