No. of Recommendations: 16
Why not an index?
Well, I was hoping the "for whatever reason" comment would sidestep that digression : )
You're certainly right, in that an index usually can't go bust. ("usually" because most stock exchanges, historically speaking, fold down with a total loss for investors. The great results of US shareholder capitalism are, to some unknowable extent, a product of survivorship bias) But an index fits the bill perfectly for the problem as stated.
But I find them immoral. If there is any company you would not invest in because you find either management or the business line odious, any at all, you can't be an index investor. Indeed, it is your responsibility not to be. Plus, it may not be critical in this context, but it just plain annoys me that by construction they have two huge flaws that mean you'll forever underperform a dartboard.
Besides that, I was thinking that pure concentration is an interesting thought experiment. Again, inspired by BNSF. Upon what company would you wager the fortunes of your entire family and its descendants that it will still be generating value (say) 35 years from now? The fact that it's an impossible task is what makes it so interesting. Punch card investing.
My two thoughts so far are Berkshire, and Investor AB. The latter, if you don't know them, is rather like a 100+ year old Swedish family office portfolio that happens to be publicly listed. The controlling family once owned a bank with a stock portfolio, and that became forbidden by bank regulators, so the portfolio was spun off. They wholly own a bunch of companies, almost all in northern Europe, and a stock portfolio, somewhat more global. Big position in Nasdaq, for example. They use the cash flow to buy more companies (sound familiar?) and also to pay a dividend (less familiar!). If I am not greatly mistaken, the economic characteristics of their investees (ROA, ROE etc) are generally considerably better than Berkshire's.
Third place for me so far is Alphabet. I have a difficult time seeing someone breach their moats within 30-50 years, even if they are broken up like Standard Oil. And they aren't TOO odious.
The only fund I've considered for the list is WIP, a broad basket of non-US inflation protected government bonds. It is by a considerable margin the safest "single ticker" I know of , and it even has positive real returns. But it is structured and listed in the US, so there is jurisdiction risk (and fees and another 30% withholding tax) purely because of the fund wrapper. Sadly it's a spectacular pain to mimic yourself unless you have your own family office.
Jim
