3 Warren Buffett Stocks to Hold Forever

As time has marched on, though, the Apple purchase has made more and more sense. Its customers are fiercely loyal, and the company makes perpetually competitive products. The launch of its services (apps, digital content, and the like) also now drives the kind of recurring revenue that Buffett has often sought, accounting for about one-fourth of Apple’s current top line.

Berkshire has shed half of its stake in the consumer technology giant this year alone, but don’t read too much into that. Buffett is not afraid to load up on a company he believes in, but even by his standards, Apple was becoming a dangerously big position at roughly half the value of all his investments in publicly traded investments.

He may also be wary of sitting on such a profitable pick when tax rates on capital gains may be about to rise.

The average newcomer like yourself, though, wouldn’t face these concerns. The same reasons he liked it then still apply for newcomers now: its leadership in the smartphone market and the growth in services revenue that the iPhone is increasingly driving. Last year’s services business improved another 12%, extending a well-established growth trend.

Lastly, although it’s rarely pointed out when talking about Warren Buffett’s stock picks, you should know that Buffett himself doesn’t necessarily personally own Apple, Coca-Cola, or any of the other tickers found within the Berkshire Hathaway portfolio.

He does, however, own a massive amount of Berkshire Hathaway shares — on the order of 15% of Berkshire (which now has a market cap right around $1 trillion), and roughly one-third of the conglomerate’s voting shares. As the cliché inelegantly but accurately explains, he eats his own cooking. In other words, Buffett is on the same side of the table as Berkshire’s shareholders.

It takes some of the excitement out of poaching a few of the Oracle of Omaha’s picks for yourself. But investing should first and foremost be about results, and Berkshire Hathaway certainly delivers them. While it doesn’t happen every single year, given enough time, Berkshire itself readily outperforms the broad market.

This is at least partly the result of Buffett’s (and his management team’s) patience with Berkshire’s holdings, something many investors struggle with. But it’s also because the bulk of its value isn’t in the publicly traded stocks it holds, but rather in the privately held entities it owns.

These include cash drivers like flooring company Shaw, Duracell batteries, Pilot travel centers, Clayton Homes, and Geico auto insurance, to name a few. These are great companies you simply can’t hold any other way.

Just bear in mind that while Berkshire is collecting lots of recurring cash from its holdings, it’s not dishing this money out in the form of dividends, which it doesn’t pay. Rather, it’s amassing this money, waiting for the next big buying opportunity — something else Warren Buffett has demonstrated incredible patience for.

So don’t let Berkshire’s current record-breaking cash hoard of $325 billion deter you from buying in. When the right opportunity comes along, Buffett will begin buying it before announcing it.

Before you buy stock in Coca-Cola, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $833,545!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 25, 2024

James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.

3 Warren Buffett Stocks to Hold Forever was originally published by The Motley Fool