The question of which stock each person should invest in depends on factors such as income, risk tolerance, goals, investment horizon, etc., all of which differ from one investor to the next. That’s why it’s always hard to come up with a single “best” stock to buy with any amount of money, but let’s give it a shot anyway. With $500, long-term investors (other than income-seekers) can hardly do better than Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), whose Class B shares are trading for just under $469 as of this writing. Here’s why.
Some of the most popular stocks on the market can be had for less than $500. Nvidia, the high-flying chipmaker that is cashing in more than any other corporation on the rise of artificial intelligence (AI), is trading for just $121 apiece. However, recent events out of China, where a company called DeepSeek developed an AI chatbot for pennies on the dollar compared to well-established leaders in the field, threaten Nvidia’s prospects. The chipmaker might overcome this headwind just fine, but this episode highlights Nvidia’s reliance on AI. In other words, Nvidia’s business is not well diversified.
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While some leading corporations on the market are more diversified than Nvidia, few can match Berkshire Hathaway’s level of diversification. Berkshire Hathaway is a conglomerate with more than 60 companies under its umbrella. These businesses span many industries, including insurance — which occupies a prominent role in Berkshire Hathaway’s empire — furniture, railroad, fast food, clothing, battery manufacturing, energy, utilities, brick manufacturing, private aviation, and more.
Though many of these businesses don’t meaningfully impact the company’s earnings, there is more. Berkshire Hathaway owns a portfolio of stocks spanning many industries and sectors. The company makes a substantial amount of money from gains from its investments. Between its portfolio of publicly traded companies and the private businesses it owns, Berkshire Hathaway is like a tiny economy. Some of its subsidiaries will occasionally struggle while others are doing fine and vice versa. That’s the power of diversification.
And even though entire economies experience downturns, Berkshire Hathaway’s presence in industries such as insurance and utilities, which tend to perform better than most sectors during recessions, can keep it afloat, at least somewhat. So, Berkshire Hathaway isn’t a particularly risky or volatile company.
Perhaps the most critical factor in a company’s success is its leadership team. Those who invest in Berkshire Hathaway would be putting their money into a corporation led by Warren Buffett, the man considered the greatest investor of all time. Since taking control of Berkshire Hathaway in the mid-’60s, the Oracle of Omaha has delivered market-beating returns to its shareholders. It’s hard to overstate how difficult it is to do so for such a long time.
Buffett would undoubtedly be a strong candidate for the No. 1 pick if there were a Wall Street CEO draft. Some might point out that the Oracle of Omaha is well into his 90s. His longtime partner, Charlie Munger, died in late 2023. Buffett might not be around for much longer, but a CEO that shrewd would have made sure to create a culture and pick a team of leaders who can thrive after him. That’s what Buffett did, having chosen Greg Abel, CEO of Hathaway Energy, to take the helm once he’s gone. The company won’t be doomed once Buffett is no longer its CEO.
Berkshire Hathaway isn’t a leader in AI, the weight loss medicines market, or any other popular investing themes on Wall Street. However, the company has a strategy that has worked for decades, a vast number of businesses and stocks under its umbrella, and an excellent leadership team that knows how to increase shareholder value. For all those reasons, Berkshire Hathaway is one of the best stocks investors can buy with $500.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Nvidia. The Motley Fool has a disclosure policy.
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