Warren Buffett’s firm might have 43% of its stock portfolio in two companies. But there’s a lot more to Berkshire Hathaway (NYSE:BRK.B) than this.

The firm also has insurance businesses, a railroad, an energy unit, and a lot of cash. And this makes it a highly diversified operation.

Berkshire’s stock portfolio is worth $274bn. And 43% of this is Apple ($62bn) and American Express ($56bn).

Ordinarily, a lack of diversification makes for a risky business. But that’s not really the case in this situation.

That’s because Berkshire has a lot of other assets besides its stock portfolio. These include:

These are all private businesses, except for the cash. But there’s a strong case for thinking that each of them might currently be worth a lot more than $62bn.

Investors therefore shouldn’t think that an investment in Berkshire Hathaway is an outsize bet on Apple. It isn’t.

Buffett actually made exactly this point at the 2023 Annual Shareholder Meeting. Back then, Apple was around 40% of the stock portfolio. In response to a question about concentration, Buffett pointed out that this didn’t make it 40% of Berkshire Hathaway. And this is right.

Since then, the company has significantly reduced its stake in Apple. It’s gone from owning 915m shares to 228m.

Share buybacks at Apple mean Berkshire’s stake has been reduced by less than it might seem. But it owns less of the iPhone company than it used to.

Investors have been trying to figure out what to make of this. In my view, though, there are more important things to focus on.

Berkshire’s private businesses create diversification for the firm. And its real strength is the way these work together. The rail and energy units create opportunities to earn high returns on insurance premiums. This is something other insurers can’t match.

Equally, the profits produced by the other subsidiaries can be used to settle insurance claims. And that allows the firm to write larger policies.

The strong balance sheet also keeps borrowing costs down across the organisation. And that’s a huge advantage for capital-intensive operations.

Berkshire’s value isn’t just its collection of assets – which are more diversified than they look. It’s the way these combine to create unique strengths.

I don’t think concentration is a major issue with Berkshire. And it’s hard to find an existential threat for a company with $390bn in cash. Nonetheless, there are some risks.

The most obvious are to do with the firm’s insurance businesses. This is where the biggest potential liabilities are. The company writes some big policies and a natural disaster could lead to large losses.

There’s also a threat of changes in regulation at its rail and energy businesses limiting future returns. And no amount of cash can eliminate that.

These are worth keeping in mind. But risk-free businesses simply don’t exist and I think Berkshire is one of the safest around.

I don’t think there’s another firm like Berkshire Hathaway in the world. And that’s not because others haven’t tried to copy it.

Building an organisation like the one Buffett put together is extremely difficult. Buying shares in it, however, is not – and that’s what I’m doing.

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American Express is an advertising partner of Motley Fool Money. Stephen Wright has positions in Apple and Berkshire Hathaway. The Motley Fool UK has recommended Apple. 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.

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