Sometimes you read an article about stocks, and you just want to scream. When I was in Italy this past week for vacation, I read a piece that was pushed to me about individual stock investing — and, as usual, it trashed you, the retail investor; it “defrocked” me by noting that individuals are buying stocks in record numbers, up to 20% from 10% of all volume in the last couple of decades. Notice the word “buying.” It’s pointed; it says you “buy,” not invest, because “buying” is meant to disparage you. A professional, or even better, an S & P 500 buyer, is an informed investor. A person who owns just a handful of stocks, even picked side by side with an index investor, is a speculator — and a speculator, per se, is a first-class idiot Where does this stem from? First and foremost, Warren Buffett , who, while obviously the best investor of our lifetime, remains a conundrum, because an individual investor would have far outperformed an S & P 500 fund by buying Berkshire Hathaway ‘s stock, even as it’s been stuck in a tax rut on some of his positions, like Coca-Cola and American Express , where he would have incurred huge capital gains if he had sold them. While I like both companies, neither is considered a standout: American Express is regarded as a credit-derived stock, not a consistent fee-based company with tremendous benefits that is highly attractive to Gen Z consumers — the point generation. Coca-Cola is part of the hated food and beverage cohort, although admittedly the best of the lot. The last few quarters have been beating the consensus, yet I bet most of you are waiting for two shoes — GLP-1 impact and the health movement — to drop. I don’t blame you. Look at what happened to the more snack-oriented competitor, PepsiCo , which may qualify for the collapse of the year, rivaling McDonald’s for the blue-chip crown, as in the one worn by the (lamented) Burger King. But let’s dig deeper into the stock portfolio Buffett has amassed at Berkshire, where he turned the chairmanship over to his son, Howard Buffett, earlier this month and the CEO role in January to Greg Abel, former head of the company’s non-insurance businesses. Where did Buffett’s outperformance really come from in the last decade? You know as well as I do: Apple , a concentrated Berkshire position in Apple. It’s a stock I have championed for decades and dubbed an “own it, don’t trade it” position in the CNBC Investing Club portfolio . The Apple position arrived at Berkshire in 2016, but Buffett has said it was a trip with his great-grandchildren to a Berkshire-owned Dairy Queen location, where he saw lots of kids glued to their iPhones, which really solidified his belief in the device not just as a great piece of technology but as a consumer product and subsequently led to Berkshire acquiring a massive stake. So, let’s just go there. The most cited reason why you can’t stray from the S & P 500 index fund? The advice of the Great One, the Oracle of Omaha, who just owned a handful of stocks of any consequence, the most important of which is Apple. AAPL ALL mountain Apple performance since its IPO in 1980 Let me ask you, could you have found Apple? It’s most likely in your hand, so I think you could. It’s not anecdotal. Every treasured quarterly call I had with Tim Cook over his 15 years as Apple CEO — and I am not exaggerating when I write “treasured” — always started with the company’s customer satisfaction, always in the highest of the 90th percentile. The secret? (It’s not really a secret since I shared it with Club members over the years.) I think it’s as empirical as empirical gets — and, in this case, means hard data that’s applicable to choosing the stock as long as it has products that scale and grow. For Apple, all boxes are checked. Cook is already missed. He moved to executive chairman on Sept. 1 and turned over the CEO job to longtime Apple executive John Ternus, who was most recently the company’s hardware chief. I got to spend some time with Ternus earlier this month during the launch of Apple’s new iPhone 18 models at the company’s flagship New York City store. Ternus seems terrific, but Cook as CEO was so special in so many ways. I know the Street was obsessed with how Cook fell behind in AI. I would like to fall behind like that. Cook got longtime search cash cow Alphabet to bankroll Apple’s AI, which means bankrolling not only Gemini but, perhaps more important, the huge power costs. One day we will look at it and say it was one of the most amazing coups, ever. Sure, Cook backed into it, but here’s a news flash: He also backed into Apple’s high-margin service revenue stream, too. I remember the days when I begged him to break it out when we would talk. He is patient. No one in business is more patient than Cook. Let’s hope Ternus is. Oh, and for an encore, the foldable iPhone Duo may be the most exciting device I have ever had in my hands. I intend to get a second phone number so I can watch things on the Duo without interruption. The iPhone 18 models came out first. The Duo goes on preorder Oct. 16 and hits stores a week later. Are you a first-class idiot if you bought Apple and nothing but Apple? One of the best professional investors I know, proudly schooled by me, only bought the stock of Apple and crushed it. If you did it, you were a dangerous speculator. In my eyes, he was and is an excellent investor who trashed conventional wisdom by not buying a couple hundred second-and-third-rated stocks, genuine losers, to dilute his wonderful position in Apple. The writer of the aforementioned pushed article would simply say, “Hey, he’s a pro. He knows what he is doing.” If you copied him or just thought of it yourself, you are labeled a fool. Apple as a sui generis selection? Hardly. Look at last week’s big cap winners: Microsoft and Meta Platforms . Hard? Maybe, but let me give you my mindset. I have owned these stocks for the Club portfolio since members met me here at CNBC in January 2022 — and most of the time, over a handful of dips avoided in 23 years at my old shop — and I simply followed them to see if they kept up and stayed in the lead. Microsoft is the undisputed enterprise software leader that can’t be displaced because its Windows operating system and Office suite are ingrained in society via personal computers, whether we like it or not. Most of us don’t like it. We like our Apple devices. But Apple computers are too expensive for the enterprise, and the marriage of Microsoft’s software and the PC came first. MSFT ALL mountain Microsoft performance since its IPO in 1986 I first spotted Microsoft in 1985, before it went public. Steve Ballmer, who was my roommate at Harvard, invited me out for investment advice. I left the night he called me up, and I had a vicious cold. The pain of landing was excruciating, and I blew out my left eardrum. I didn’t hear much on the trip, but I managed, although my hearing never fully came back from that trip, and today I need help to hear from that ear. I gave him the advice. Ballmer, who was already climbing the ranks at Microsoft, gave me the company’s business, and I brokered it with corporate finance. Ballmer would later become CEO of Microsoft. Goldman Sachs , where I was working at the time, took the deal and sanctioned me because I poached; my territory was the New York area, not the West Coast. I wasn’t even reimbursed for my airfare. That was how Goldman worked. Anyway, I had the luxury of knowing how great and tenacious Microsoft could be, which was enough to know it could survive the Justice Department inquiry, which started in 1998. More importantly, because I knew there were smart guys leading Microsoft, I could predict that they would expand well beyond just the PC and the server to be a cloud computing juggernaut. Still smaller than the much larger Amazon Web Services, but at the time, it was still growing at an astonishing 40%. Along the way, Microsoft bought LinkedIn for $26 billion, an acquisition that was completed in December 2016, and Activision Blizzard for $69 billion, a deal that closed in October 2023 — two companies that have cemented leadership in lagging categories but that might just be for now. Microsoft shrewdly and early on decided it wanted to be a leader in artificial intelligence. So, it took a huge stake in one of the two best, OpenAI. It also built its own AI, Copilot, which was initially derided by Wall Street but liked by 30 million users, defying every single projection. OpenAI turned out to be fickle to the point of being erratic. The current CEO of Microsoft, Satya Nadella , is anything but erratic. He is so serious to the point of being frighteningly competitive. While I was good friends with Ballmer, and stuck with him when he ran the company from 2000 to 2014, I was quite pleased with the transition. I met Nadella through Marc Benioff , co-founder and CEO of Salesforce , soon after the launch of Microsoft’s 2010 launch of Azure, and Nadella made some seemingly outrageous claims of growth trajectories, all of which were exceeded. Like I said, a very serious man. I think Benioff and Nadella had a falling out over LinkedIn, which Benioff thought he had bought until Nadella stepped in. I tried to stay friendly with Nadella. Sadly, I failed. My bad. I just wasn’t able to crack the code, I guess. You can’t be liked by everyone, and you can’t like everyone. But I had some sort of blind spot, I guess, that extends to his incredibly good chief financial officer, Amy Hood. I just blew it with Nadella, I guess. No matter, what Microsoft does have is a lot of cash. We mistakenly derided its Copilot because when OpenAI does reach positive cash flow, it would seem to be able to get its fair share. What Microsoft did do was use its cash hoard to buy energy, which is the derivative of AI that it can excel in. I know, that’s considered prosaic by time, lacking in intellectual property. True. But the scale is what matters because it makes for a terrific moat. Now let’s circle back. Was Microsoft hard to spot? I would contend that the only thing that would make you balk at owning it would be the product itself. Again, though, scale and growth win, and therefore, Microsoft has been a terrific stock, but one many sold in the last few months of underperformance because they didn’t really know the company. I was frustrated, too. But I stayed with Microsoft. META ALL mountain Meta performance since its IPO in 2012 Now let’s deal with Meta. As difficult as Microsoft was to stay long, Meta was the true bear. Why did I say stick with it when it was crushed? I did have the advantage of spending some good time with CEO Mark Zuckerberg , but I shared with you everything I had, namely that Zuckerberg is viciously competitive, quite pleasant — unknown but relevant — and he was not going to be left behind in AI. Meta was considered a bust on AI except for the power angle, which is covered well by Entergy’s nuclear power plants. Entergy, there’s a stock. Wow. Zuckerberg is full of surprises. Always will be, ever since he failed to have a handheld version of Facebook when the company went public in 2012. This Muse, the personal AI agent launched earlier this month, came out of nowhere. But what exactly does that mean? It came out of Zuckerberg’s head. That’s all I care about. Again, I would argue that you needed to invest in Meta — had to invest in Meta — because it has so much going for it, including great interactive marketing, the Twitter-now-X competitor Threads, which I think will ultimately rival TikTok — big claim, but I feel good about it, and Whatsapp, which is the phone company for the world. Maybe this one would have been easier to spot if you were a European? Bottom line I want to circle back to my original proposition: Picking stocks is now considered a fool’s game. I spent a year of my life writing a book about picking individual stocks, “How to Make Money in Any Market,” precisely because of the type of article that spurred this screed. I applaud the individuals who have taken the plunge. I regale those who have taken the percentage of overall ownership of stocks by individuals to 20% from 10%. Most importantly, it infuriates me that so many of the articles about individual ownership of stocks are demeaning and seek to denigrate you. Why? What’s the darned point? The only reason why investing in the S & P 500 makes sense to me is that the index is actively managed, and they are constantly dropping lousy companies and putting in good ones. Still, I can’t own stock because of my standing as a financial journalist, and it drives me crazy that I am stuck in the S & P 500. Stuck. Believe me, if you were restricted from individual stock ownership, you would know the pain, too. Maybe it makes the whole exercise that I plow through more acute. One day it will dawn on people that, with the exception of the hundred-some-odd stocks that are some hack version of bitcoin and some awful exchange-traded funds, the best way is the mix way: Stocks and indexes. It just feels ordained: 30% here we come. (Jim Cramer’s Charitable Trust is long AAPL, MSFT, META, CRM, GS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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