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Five Stocks For the Rest of Your Life?



June 05, 2013 – Comments (1) | RELATED TICKERS: BRK-A , MKL , LUK

Board: Berkshire Hathaway

Author: ultimatespinach

I you could only own 5 stocks for the rest of your life (BRK included) which would they be?

If you'll humor a little quibbling with the rules, I'm familiar with the value investing meme about companies so safe you can hold them forever, but I think of it more as an ideal -- a way to think about a company's long-term competitive advantages -- than a reality. Even KO, perhaps the leading exemplar in the age of Warren Buffett, might one day find a world less enthused about mass consumption of sugar water. I'm not predicting it, but I wouldn't be shocked to escape a coma in fifty years to discover it. Well, I would be shocked to escape a coma in fifty years, given the overall mileage that would imply, but not to find Coke had lost favor. Some folks think of Wal-Mart as a safe eternal holding, but if in fifty years it looks like Sears looks today it would not rank among the most surprising events in human history. Nothing is forever, except possibly Charlie Munger.

To manage money, one must keep up with the world and be ready to adjust to its many changes. So I would say that in your hypothetical, where you are capable of making no adjustments to your initial decisions, you are looking not for stocks but for money managers capable of making the adjustments you cannot. In that case, I would think you'd want to include mutual funds and ETFs, since that's basically the business they're in.

If they must be stocks, there are the usual suspects -- Berkshire, Loews, Markel, Leucadia, Brookfield. These are firms whose investment officers will almost certainly change the mix of investments during your lifetime. You might throw in Fairfax if you want less optimism, or Fairholme (an actual mutual fund) if you want more concentration, or Greenlight Re if you think David Einhorn eventually finds people to run it who understand the reinsurance business.

So the hypothetical pretty much guarantees the result -- and negates it, since changing the investment mix along the way is theoretically what you're trying to prevent. The hypothetical is another way of asking, What would you do if you had to off-load the management of your money to (five) other people/institutions for the rest of your life?

Given potentially destructive changes in the management of any firm or fund, my own choice would probably be some mix of global and U.S. market index funds that would at least keep up with what was working at the time through market capitalization.

Of course, if I had any advance notice of my looming lifelong incapacity, I might just invest in a long-term care facility. 

1 Comments – Post Your Own

#1) On June 05, 2013 at 12:10 PM, constructive (99.97) wrote:

I don't think conglomerates are necessarily any better bets for 50 year investments than focused companies. The specific capital allocators you admire will be long gone. Berkshire Hathaway for example could exit or enter major businesses and barely resemble the Berkshire Hathaway of today, whereas Coca Cola's course might be more predictable.

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