Buffett’s 7/10 Review: Strong European Moats but Lacks American Growth

Well, grab a Cherry Coke and pull up a chair. Looking at this portfolio, I almost feel like I should be drinking an espresso on the Champs-Élysées instead of sitting here in Omaha. You’ve put together a collection of businesses that looks like a who’s who of the European continent. Charlie Munger always used to say, "All I want to know is where I'm going to die, so I'll never go there." Well, if you’re looking for your portfolio’s final resting place, it seems you’ve bet the entire farm on Europe. I admire your taste for the finer things, but let's look under the hood and see if you bought these businesses at a fair price, or if Mr. Market took you for a ride.

I have to hand it to you—you understand the concept of a competitive moat. Charlie and I would look at this and smile seeing that over 54% of your capital is parked in businesses with intangible assets like enduring brands and patents. Companies like LVMH, Nestle, and Diageo have consumer mindshare that takes decades and billions of dollars to build. Then you've got another 25% sitting in businesses with massive scale advantages like Shell and Allianz. You are buying monopolies and heavyweights, like ASML with their lithography machines, which is exactly how you build long-term wealth.

Your sector breakdown is also quite sensible. You're holding a sturdy 18% in consumer staples and roughly 15% each in tech, discretionary, and healthcare. It's a portfolio built to weather different economic seasons.

However, let's talk about your cash reserves, sitting at a measly 4.6%. I've always said that cash is king only when you deploy it, but you need to actually have the cash when Mr. Market gets depressed and offers you a bargain. Right now, you barely have enough dry powder to buy a round of Cherry Cokes if the market crashes. A cash position this low leaves you with absolutely no flexibility for opportunities.

🚩 You're Betting Against America: Over 95% of your geographic exposure is in Europe. I have said time and time again: never bet against America. By completely ignoring the United States, you are missing out on the most dynamic, innovative economic engine in the history of the world. Diversification is protection against ignorance, and ignoring the U.S. market is a mighty big blind spot.

🚩 Overpaying for Growth: You’ve got over 40% of your strategy tilted toward growth, holding names like Novo Nordisk and ASML. They are spectacular businesses, but remember: a wonderful company at a fair price beats a fair company at a wonderful price. If you bought into Ozempic and high-end chips at the peak of their hype cycles without a margin of safety, your returns are going to go on a diet.

🚩 Missing the Bucket for the Gold: As I mentioned, that 4.6% cash reserve is a real problem. When it rains gold, you want to reach out the window with a bucket, not a thimble. Right now, you don't even have a thimble.

🚩 Diworsification: You own an ETF tracking the broader European market at 8.3% of your portfolio, while simultaneously hand-picking the absolute largest companies in that exact same index (Nestle, LVMH, ASML). You are paying ETF fees to hold the exact same businesses you already own directly. That just doesn't make much sense to me.

I'll give this portfolio a solid 7 out of 10. You have a fantastic eye for high-quality businesses with deep, enduring competitive moats, but your portfolio construction leaves you vulnerable to regional stagnation and leaves you no cash to take advantage of market panics.

Here is what I would suggest you do:

1. Build up your cash buffer: Let some dividends pile up or trim your most overvalued growth names to get your cash reserves closer to 10-15%. You need dry powder.

2. Cross the Atlantic: Start looking for wonderful businesses in the United States. You don't need to sell your European champions, but your next deployed dollars should probably go into American enterprises.

3. Check your receipts: Do a valuation check on your high-flying growth stocks. Ensure you actually have a margin of safety, because growth is only valuable if it's purchased at a reasonable price.

4. Drop the redundant ETF: If you're going to pick the biggest blue chips in Europe yourself, sell the European index fund and use that capital to diversify your geography.

Keep your eyes on the business, not the stock price. As I always say: "Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1."