Warren Buffett once used LeBron James to explain diversification risk and likened his return to Cleveland to the demise of the new Coke

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  • LeBron James led the charge for the Los Angeles Lakers to a 17th NBA Championship on Sunday.
  • Warren Buffett has previously highlighted James’ critical role on the basketball court to point out the downsides of diversifying as an investor.
  • “If you have LeBron James on your team, don’t take him out of the game just to make room for someone else,” famed Berkshire investor and CEO Hathaway said in 2008.
  • “It’s crazy to put money in your 20th choice, rather than your first choice,” he added.
  • Buffett also compared James’ return to the Cleveland Cavaliers in 2014 to the return of Coca-Cola to its classic formula.
  • Visit the Business Insider homepage for more stories.

LeBron James led the Los Angeles Lakers to a record-breaking 17th NBA Championship Sunday night. Warren Buffett, a longtime fan and confidant of the basketball superstar, once used James’ outsized contribution to his team to explain the danger of diversification for investors.

“If you have LeBron James on your team, don’t take him out of the game just to make room for someone else,” billionaire investor and CEO of Berkshire Hathaway in 2008 told a group of students. in business school.

“It’s crazy to put money in your 20th choice, rather than your first choice,” added Buffett, according to Dang Le, one of the students in attendance.

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Buffett took this approach at Berkshire. Its five largest stocks – Apple, Bank of America, Coca-Cola, American Express and Kraft Heinz – account for more than 75% of its roughly $ 200 billion equity portfolio.

On another occasion, the investor compared James’ return to his hometown team, the Cleveland Cavaliers, to the return of Coca-Cola to its classic formula.

“He loves Cleveland, Cleveland loves him,” Buffett said in 2014, according to cleveland.com. “In a way, it’s like new Coke and old Coke. ”

“Years ago, they were going to take out the old Coke so they could make a new one, and all of a sudden everyone remembered how much they loved old Coke,” he continued. ” It’s like that. ”

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Buffett and James first met when the athlete traveled to Omaha to shoot a skit for the Berkshire Annual Reunion in 2007. The couple have since been mutual admirers.

“I’m an Akron kid who lived a long time in poverty, and sometimes I send financial statements to one of the richest guys ever,” James told Sports Illustrated in 2012.

“It’s pretty scary,” he continued. “I’m like, ‘Why is he talking to me?’ ”

Meanwhile, Buffett praised James’ maturity in an interview with the Miami Herald in 2012, and the player’s “money-mindedness,” or financial knowledge, in an interview with USA Today in 2018. .

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