Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. The response format is open.

What do “cake and underwear” stocks refer to?
JoeTaxpayer's answer is dead on... but let me give my own two cents with a little bit of math. Otherwise, I personally find that people talking about diversified portfolios tends to be full of buzzwords.  Let's say that Buffett's investments are $10 million. He would like to earn ≥7% this year, or $700,000.  He can invest that money in coca-cola//underwear, which might return: Or he can invest in "genius moves" that will make headlines: (like buying huge stakes in Goldman Sachs), which might return: And he makes plays for the long haul based on the expected value of the investments. So if he splits it 50/50... ($5 million/ $5 million), then his expected value is 822,250: By diversifying, he does reduce the expected value of the portfolio... (He is not giving $10 M the chance to turn into $1.5 million or $2 million for him!). The expected value of that shock-and-awe portfolio with all $10 million invested in it is $1.2M. By taking less risk... for less reward... his expected return is lower. But his risk is lower too.  Scale this example back up into the $100 million or billion range that Buffett invests in and that extra margin makes the difference.  In the context of your original article, the lower-risk 'cake and underwear' investments let Buffett go big on the things that will make 20%+ returns on billions of dollars, without completely destroying his investment capital when things take a turn for the worse.