Buffett’s Verdict on ASML and LVMH: Stop Ignoring the American Engine

Well, pull up a chair and let me open a Cherry Coke. Looking over this portfolio, it seems you’ve been doing your shopping on the Champs-Élysées and in the boardrooms of Frankfurt rather than down on Wall Street! I always say you should invest in what you understand, and you’ve clearly put together a very deliberate collection of European heavyweights.

When Charlie Munger and I look at businesses, we aren't looking for flashing ticker symbols on a screen; we are looking for pieces of a real business that we'd be happy to own if the stock market closed for ten years. I must say, glancing at the names you've assembled here, you share our appreciation for a good, old-fashioned competitive moat. You aren't chasing meme stocks or digital tulips, and for that alone, you're already ahead of most of the speculators out there. Let's dig into the meat of what you actually own.

Let’s start with your cash reserves, sitting at a sensible 9.1%. Cash, to me, is like oxygen—you don't notice it until it's gone. Keeping nearly 10% in dry powder means you have the flexibility to swing the bat when Mr. Market inevitably gets depressed and starts offering up wonderful businesses at bargain prices. Just remember, idle cash is dead capital over the long run, so keep your eyes peeled for the right pitch.

Looking at your sector breakdown, you’ve got a nicely balanced plate. You're leading with Technology at 22.1% and Consumer Staples at 15.9%, followed closely by Healthcare, Energy, and Finance. What really warms my heart is your competitive moat profile. Over half your money is sitting in businesses protected by intangible assets like patents and iron-clad brands. You’ve got LVMH at 11.2% and L'Oreal at 7.6%—these companies possess immense pricing power. People will keep buying luxury handbags and beauty products no matter what the economy is doing.

You've also allocated wonderfully to companies with a massive scale advantage (nearly 30% of your portfolio), like Shell (7.1%) and Airbus (5.8%). And at the top of your list is ASML at 12.4%. Now, Charlie and I love a good monopoly, and ASML practically owns the market for the machines that make the world's most advanced chips. Combine that with SAP (9.7%) and its massive switching costs, and you’ve built a fortress of a portfolio.

Now, I wouldn’t be doing you any favors if I just patted you on the back. Here’s where I think you might be leaving yourself exposed:

🚩 Never Bet Against America: Your geographic exposure is completely lopsided, with nearly 91% of your capital tied up in Europe. The American tailwind has been the greatest wealth-creation engine in human history. By completely ignoring the United States, you are missing out on the most dynamic, shareholder-friendly market in the world.

🚩 Paying Up for Growth: You’ve got nearly 36% of your portfolio categorized as Growth, heavily weighted by ASML and Novo Nordisk (8.8%). Novo is a wonderful business curing real problems with drugs like Ozempic, but a wonderful business at a terrible price is a terrible investment. If you overpaid for these growth machines without a proper margin of safety, any slight stumble in their earnings will be punished severely by the market.

🚩 Regulatory Headwinds: Europe is notorious for its heavy regulatory hand. Your energy picks like Shell and TotalEnergies (4.9%), plus your big tech and healthcare names, are operating in a jurisdiction that loves to tax and regulate success. You need to be certain these businesses can out-earn the bureaucratic drag.

I'm going to give this portfolio a solid 8 out of 10. You've done a fantastic job selecting businesses with durable competitive advantages, wide moats, and real earnings. You aren't gambling; you're investing. But even a fortress needs to make sure it's built on solid ground.

Here is my advice to you moving forward:

1. Deploy That Cash Across the Atlantic: Use your 9.1% cash reserve to start building positions in high-quality American blue chips. You need geographic diversification to protect against a stagnant European economy.

2. Check Your Valuation Tags: Go back and look at the price-to-earnings ratios you paid for ASML and Novo Nordisk. Ensure you actually have a margin of safety. If they are priced for perfection, consider trimming them to buy something cheaper.

3. Hold the Brands Forever: Your consumer staples like Nestle (8.3%) and your luxury goods companies are the bedrock of compounding wealth. Let them do the heavy lifting over the next couple of decades.

Always remember: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." You've found the wonderful companies; just make sure you didn't pay a foolish price for them. Keep compounding!