Berkshire Hathaway CEO Warren Buffett has said that his company’s “favorite holding period is forever.” The famously successful moneyman’s ability to identify businesses worth holding for the long haul has helped his company benefit from winners that kept on winning, translating into portfolio performance that has absolutely crushed the broader market.
With Buffett’s incredible success in mind, taking some inspiration from the Oracle of Omaha could help take your portfolio to the next level. Here’s a look at three stocks in the Berkshire Hathaway portfolio that are worth buying and holding for the long term.
Apple ( AAPL 0.34% ) has built one of the most valuable brands in the consumer electronics and software services spaces. The company is the far-and-away leader in the mobile hardware market, far exceeding the competition in terms of profitability in the category thanks to its top-tier pricing power and incredibly loyal customer base.
This brand strength and customer loyalty have also allowed it to become an early leader in emerging product categories and create a powerful, encompassing product ecosystem. The Oracle of Omaha has been absolutely effusive about his love for Apple, going so far as to describe it as “the best business” he knows and as one of the four pillars of Berkshire Hathaway.
The investment conglomerate’s position in Apple is now worth roughly $157.5 billion. The tech company accounts for roughly 47% of Berkshire’s stock portfolio, representing an absolutely massive vote of confidence from one of history’s most successful investors. And with strong positions in mobile and computer hardware, software services, and untapped potential in unfolding categories such as augmented reality and smart cars, Apple looks poised to continue serving up more big wins.
2. Bank of America
The Federal Reserve recently announced a quarter-point interest rate increase and forecast six more rate hikes this year. The measures are being conducted with the intention of fighting high levels of inflation currently hitting the U.S. However, the downside to interest rate hikes is that they will create their own pressures on the economy by making it more expensive to borrow money to fund growth initiatives.
Banks are one of the few businesses that are positioned to directly benefit from rising interest rates, and Bank of America ( BAC 1.94% ) stands out as Buffett’s favorite in the industry by far.
With roughly $45 billion of its stock holdings in its portfolio, Bank of America stands as Berkshire Hathaway’s second-largest stock position. The business is in far better shape than it was when the pressures of the 2008-09 financial crisis brought it to the brink, and it looks positioned to benefit from the rising interest rate environment.
Bank of America also pays a substantial dividend, with its current yield sitting at roughly 2%. What’s more, the company has been raising its payout at a rate that significantly exceeds the currently elevated rate of inflation. The company’s last dividend hike represented a 17% increase, and favorable business trends could put the banking giant in a good position to deliver another substantial payout raise this year.
Even more so than usual, Amazon ( AMZN 0.83% ) has been in the news lately. The tech giant is on track to carry out a 20-for-1 stock split in June, and the announcement has helped spur an uptick in bullish sentiment. The e-commerce and cloud computing giant has posted massive gains since its last stock split in 1999, and making its share price lower through a split would make buying the stock more accessible for many investors and open the door for inclusion in the Dow Jones Industrial Average index.
While the stock split won’t do anything to alter the company’s fundamental performance, it’s worth noting that other growth stocks have seen stock gains correlate with split announcements and completions. Alphabet recently announced its own 20-for-1 stock split that corresponded with a surge in bullish momentum, and companies including Nvidia, Tesla, and Apple have also posted big valuation gains in windows of time shortly preceding and following splits.
However, while the potential for a near-term, split-related catalyst for gains may be appealing, it’s Amazon’s dominant positions in online retail and cloud infrastructure, as well as its fantastic penchant for innovation, that really stand out as reasons to own the stock for the long haul. In addition to its fast-growing digital ads business, the tech giant also has forefront positions in potentially revolutionary trends including artificial intelligence and robotics, and it looks poised to continue delivering wins for long-term shareholders.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.