If I had to buy one company for my Stocks and Shares ISA, it would be this

Diversification’s at the heart of a good Stocks and Shares ISA, but if this Fool was pushed to pick just one company for the next decade, it would be this one.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When it comes to choosing a single stock for a Stocks and Shares ISA, we Fools often preach diversification. But if pushed to pick just one company, I’d have to go with the legendary Berkshire Hathaway (NYSE: BRK.B). Let’s take a closer look.

Proven track record

Led by the incomparable Warren Buffett, Berkshire has become a byword for savvy, long-term value investing. The company’s Class A shares have delivered an eye-watering 39,225% return since its IPO in the 1980s.

Created with Highcharts 11.4.3Berkshire Hathaway PriceZoom1M3M6MYTD1Y5Y10YALL1 Aug 198031 Aug 2024Zoom ▾1985199019952000200520102015202019901990200020002010201020202020www.fool.co.uk

But Berkshire isn’t just another company – it’s a smorgasbord of quality businesses all rolled into one tasty package. From insurance giant GEICO to the BNSF railway, and from Berkshire Hathaway Energy to a host of manufacturing firms, this conglomerate offers a good deal of built-in diversification.

And let’s not forget Berkshire’s mouth-watering portfolio of blue-chip stocks. Fancy a bite of Apple, Bank of America, or Coca-Cola? Berkshire’s got it covered. This diversification means that when one sector catches a cold, the others can help pick up the slack.

The fundamentals

Berkshire’s sitting on a war chest of over $140bn in cash and short-term investments. That’s not just a rainy day fund, it’s a ‘buy-companies-when-they’re-going-cheap’ fund.

Speaking of buying cheap, the business itself looks like it might be at a discount. With a price-to-earnings ratio of around 11.4 times, it’s trading well below the S&P 500 average. For a company with it’s track record, that feels like a potential bargain. With my favourite metric, a discounted cash flow (DCF) calculation, the shares are potentially as much as 51% undervalued too.

But what about the future? Its energy businesses are adapting to the renewable transition, and its insurance operations continue to generate piles of cash for investments. And while Buffett won’t be at the helm forever, the company’s been planning for succession for years. Trusted lieutenants like Greg Abel are waiting in the wings, ready to carry on.

Risks

Of course, no investment is without a few notable risks. The firm’s sheer size can make it hard to find acquisitions big enough to move the needle. Those seeking dividends will also need to look elsewhere. I’d also say with 47 holdings, investors can’t necessarily review every company in the portfolio. Although the record’s good, investors do need to trust that management will continue to make smart decisions.

I also worry that any regulatory change in the insurance sector could impact the business. It has served as a real cash cow over time, but if this were to change, then investors may get nervous.

One for the future

Obviously, past performance doesn’t guarantee future results. But I suspect Berkshire’s enduring success, strong fundamentals, and relatively attractive valuation make it a tempting choice for long-term investors.

So for those looking for a one-stop shop that could potentially deliver solid returns over the long haul, Berkshire Hathaway might just be worth a closer look. There’s never a sure thing in the market, but I already hold some of its shares and feel they can help me sleep soundly.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Gordon Best has positions in Berkshire Hathaway. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »