Millionaires’ top stock pick: Berkshire, not Apple

Warren Buffett oversaw some candy decorating last month on a tour of the See’s Candies factory in Los Angeles.
See’s Candies via AP Images
Warren Buffett oversaw some candy decorating last month on a tour of the See’s Candies factory in Los Angeles.

NEW YORK — Warren Buffett’s Berkshire Hathaway Inc. regained its ranking as the favorite stock pick among US and Canadian multimillionaires, beating Apple and fending off the increasing preference for exchange-traded funds.

Members of Tiger 21, a New York-based group of wealthy investors, selected Berkshire in an annual survey of preferred investments.

Apple Inc., which had held the top spot the last two years, slipped to number two.


‘‘The bloom is off of Apple,’’ said Michael Sonnenfeldt, founder and chairman of Tiger 21. ‘‘For people who held Berkshire Hathaway it’s held its appeal, but for Apple, a lot of people who were on that ride have realized that perhaps the best days are behind it.’’

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Apple’s share price has fallen by more than one-fourth from its September 2012 record high as the company battles lower-cost rivals and seeks to prove it can innovate without cofounder Steve Jobs, who died in 2011. The Berkshire choice shows members’ satisfaction with Buffett’s strategy, even though the 83-year-old chief executive won’t publicly identify a successor.

Qualcomm Inc., the biggest maker of chips for mobile phones, was the other individual stock among the members’ top five. The San Diego company surged to number four from 20th last year. The top five included two ETFs for the first time: The iShares MSCI EAFE Index Fund was number three, and the SPDR S&P 500 ETF Trust ranked number five.

Berkshire soared in its first 25 years under Buffett as the billionaire transformed a textile maker into an insurer and placed winning bets on stocks such as Capital Cities/ABC and Coca-Cola Co. More recently, he has expanded by buying whole companies, such as the Burlington Northern Santa Fe railroad.

Berkshire has risen 31 percent this year, compared with a 22 percent gain in the Standard & Poor’s 500 index. The stock had dropped to number three in last year’s survey after being second in 2011 and first in 2010.


Tiger 21 is a network of 220 entrepreneurs, investors, and executives who have at least $10 million in investable assets each and more than $20 billion combined. Members, whose average age is 55, meet monthly in seven cities in the United States and four in Canada to share ideas. They pay annual membership fees of $30,000.

Members had, on average, 24 percent of assets in stocks, 21 percent in real estate, 19 percent in private equity, 15 percent in fixed income, 11 percent in cash, 8 percent in hedge funds, 1 percent in commodities, and 1 percent in miscellaneous investments as of Sept. 30.

Qualcomm has benefited as growing demand for smartphones lifts sales. The stock has gained 11 percent this year, trailing the 32 percent surge by the Philadelphia Semiconductor Index. Some investors have sold because of concern that revenue growth, which has averaged almost 30 percent each quarter this year, won’t translate into profit as the company faces more competition in emerging markets.

Members’ preference for low-cost ETFs, which are linked to indexes and trade like stocks, has increased because active fund managers usually don’t beat the market over time after fees are factored in, Sonnenfeldt said.

The SPDR S&P 500 ETF, known as the SPY, last year became the first ETF among members’ top five picks, ranking number two. The security tracks the US benchmark index and is offered by Boston-based State Street Corp. New York-based BlackRock Inc.’s iShares MSCI EAFE ETF, which tracks equities in Europe, Australasia, and the Far East, joined the list’s leaders for the first time this year.


US-based ETFs attracted an estimated $33.6 billion in September, compared with $2.5 billion flowing into US open-end mutual funds, according to the researcher Morningstar Inc. ETFs charge an average 0.67 percent annual fee, compared with 1.26 percent for the typical mutual fund, Morningstar data show.

Tiger 21 also asked members their preferred asset class. About 41 percent chose public equities, followed by private equity and hedge funds, which both got 17 percent of the votes. Hedge-fund preference declined in the past two surveys, while private equity gained favor.

The private-equity asset allocation is the highest in a decade, Sonnenfeldt said. The increase is driven more by direct investments members are making in closely held companies than by commitments to private-equity funds.

Investors are losing money on an inflation-adjusted basis in safe assets such ad government bonds and cash, which is causing them to take more risks to preserve spending power, Sonnenfeldt said. They’re choosing investments they know, such as start-ups and small businesses, he said. Most Tiger 21 members have become wealthy by building a company rather than through an inheritance.

Members listed Chickasaw Capital Management LLC and Neuberger Berman Group LLC’s Rachlin Group as two favorite money managers. Both invest in income-producing master limited partnerships.

Tiger 21’s survey was based on responses from more than 70 members.