In this article, we presented the 15 best long-term stocks to buy now. Click to skip ahead and see the 5 best long-term stocks now.
The billionaire legendary investor Warren Buffett’s strategy of investing for the long-term have helped his investment holding company Berkshire Hathaway to generate an average of 20% returns since it started trading in 1965. Buffett, who is also known as the Oracle of Omaha, has been following Benjamin Graham’s school of value investing approach.
The new investors are suggested to learn Buffett’s investing strategies to improve returns from stock market investing. Buffett, who is worth $83.4 billion according to Forbes, began investing as a child.
Oracle of Omaha has been following Benjamin Graham's investing strategy of buying stocks at discounts and then holding them for a longer time to enjoy the dividends and share price gains. Buffett says Benjamin Graham’s ‘Intelligent Investor’ is the best investing book in the world. Since Warren Buffett has some stocks in his portfolio that he has been holding on for 30 years or more, we thought Warren Buffett's 13F portfolio has to be one of the best places to look for the best long-term stocks to buy now.
Warren Buffett of Berkshire Hathaway
Since we are focusing on Warren Buffett’s 15 long-term stock investments in this article, it’s key to take a brief look at Buffett’s stock-picking principles.
Invest in what you know: The legendary investor suggests investing in businesses that you know well. Over the years, Berkshire has been sticking with companies that he knows well. He avoided investing in tech and internet companies. This is because the legendary investors say he doesn't understand their business models.
Keep a long-term mindset: This is the key to stock market investing, according to Oracle of Omaha. He has been holding stakes in several companies over the last few decades.
Identify cheap stocks: Warren Buffett likes to buy stocks when they are trading at discount and he holds them until these equities reach the fair value. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” Buffett said in his annual letter to Berkshire Hathaway shareholders.
Compounding and Patience: The billionaire investor likes the concept of compounding and he always suggests others to follow compounding ideas.
Invest like you are buying the entire company: He suggests investors buy stocks in a way as if you are buying the entire company.
While Warren Buffett's reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start reviewing the 15 best long-term stocks that Warren Buffett likes to hold in his portfolio.
15. Amazon (NASDAQ: AMZN)
The world's largest e-commerce company Amazon (NASDAQ: AMZN) has been a permanent member of Buffett’s portfolio since the beginning of 2019. It currently accounts for 0.73% of the overall portfolio valued at $1.6 billion.
Amazon is one of the fastest-growing companies in the world. The largest e-commerce company has generated a share price growth of 400% in the past five years. Its shares accelerated the upside momentum as the internet company benefited from consumers' shift towards online platforms amid the pandemic. Its September quarter revenue grew 37% year over year to 96 billion.
Baron Opportunity Fund said the following about Amazon.com in its 2020 Q3 investor letter:
“Amazon.com, Inc. is the world’s largest retailer and cloud services provider. Shares were up on strong second quarter revenue metrics – with paid unit growth accelerating to 57%, a startling figure for a company of this scale – as Amazon benefited from recent investments in logistics and distribution to meet increased COVID-19-related demand. Amazon has the unique ability to deliver all the necessities of life safely to your doorstep, including groceries. Amazon also reported a stunning beat in operating profit, with $5.8 billion of operating income, almost six times Wall Street’s expected figure. While e-commerce penetration is rising rapidly and Amazon continues to grow its addressable market by entering new verticals, we continue to view Amazon Web Services as the more material driver of the company given its leadership in the vast and growing cloud infrastructure market and potential to compete in application software in the years to come.”
14. Bristol-Myers Squibb Company (NYSE: BMY)
BMY ranks 14th in our list of the best long-term stocks to buy now. Warren Buffett has initiated a position in Bristol-Myers Squibb Company (NYSE: BMY) during the September quarter, with the purchase of 29 million shares valued at $1.8 billion.
Bristol-Myers Squibb Company is one of the most favorite stocks of long term investors because of sustainable growth in revenues and earnings. It has generated 6% year over year growth in September quarter revenues while earnings per share of $1.63 grew 39% from the past year period. Bristol-Myers Squibb Company offers a quarterly dividend of $0.49 per share, yielding above 2.2%. It has raised dividends in the past fourteen straight years.
Generation PMCA said the following about Bristol-Myers Squibb in its 2020 Q3 investor letter:
“Bristol Myers Squibb is a leading biopharmaceutical company focused on oncology, autoimmune diseases, cardiovascular diseases, and fibrosis. The market has been overly concerned with the loss of exclusivity of Revlimid in 2 years and Eliquis in 5 years. We believe the company has the ability to offset these patent expirations via M&A (it recently announced the acquisition of MyoKardia) and its compelling pipeline, including TYK-2, Opvido, Ozanimod, and Zeposia. To account for the risks associated with drug development and M&A, our valuation models assume zero growth after the next 5 years. The company has a 2.9% dividend yield and our FMV is $75.”
13. Merck & Co (NYSE: MRK)
The New Jersey-based Merck & Co (NYSE: MRK) is also a new member of Berkshire’s portfolio. Buffett has bought $1.8 billion worth of the pharmaceutical giant shares in the latest quarter, accounting for 0.81% of the portfolio.
It has raised dividends in the past ten successive years. The company has generated $12.55 billion in the September quarter revenue, with expectations that full-year revenue will hit $48 billion.
12. AbbVie (NYSE: ABBV)
ABBV ranks 12th in our list of the best long-term stocks to buy now. The pharmaceutical giant AbbVie (NYSE: ABBV) is a new member of Buffett’s portfolio. Berkshire Hathaway has created a big position in AbbVie during the third quarter, with an investment valued at $1.8 billion. AbbVie appears like a good stock for long-term investors because of hefty dividends and prospects for steady share price gains.
Shares of the pharmaceutical giant AbbVie jumped more than 22% this year, extending five years' gains to 100%. The company has also raised dividends in the past seven straight years.
11. Visa (NYSE: V)
The payments technology company Visa (NYSE: V) is among the long term investments of Warren Buffett. The payments technology company continues generating big returns for investors both in the form of dividends and share price gains. Berkshire holds 9.9 million shares of the payment company valued at $1.99 billion.
Shares of Visa grew almost 1000% in the past ten years while the average dividend growth rate in the past five years stood around 20%. Qualivian Investment Partners said the following about Visa in its 2020 Q3 investor letter:
“Visa: was a positive contributor in the quarter, just less so than our other holdings. Visa’s fiscal Q4 quarter (calendar Q3) results were better-than-expected as revenue and EPS beat street expectations driven by stabilizing domestic transaction volumes and good expense control. Although results showed continued pressures from depressed crossborder volumes, which may continue for the foreseeable future as with MA, we believe the worst is behind us and our long-term thesis of V’s structural positioning on the other side of the pandemic remains intact. Looking to the back half of 2021 and going into 2022, we see a recovery in cross-border activity, which together with traditional spending improvements at the POS, leaves considerable room for upside upon reopening. Further, once the macro normalizes (medium term), we believe V (and MA) will continue to benefit from structural drivers including increased contactless payments, more eCommerce transactions, as well as a lift in the value-added services like fraud/gateway/marketing services, and demand for other flows such as B2B, G2C and use of Visa Direct. There is no credible competition on the horizon for the Visa/Mastercard payment networks.”
10. General Motors (NYSE: GM)
GM ranks 10th in our list of the 15 best long-term stocks to buy now. General Motors is also one of the long-running investments of Warren Buffett. The investment holding first took a stake in a Michigan based company in 2012. GM currently accounts for 1.03% of the portfolio valued at $2.3 billion. Warren Buffett has added to its existing position in the latest quarter as shares of General Motors remained under pressure in the past three quarters due to pandemic.
Unlike other Berkshire investments, the shares of General Motor underperformed in the past five years compared to the broader market index.
9. The Bank of New York Mellon Corporation (NYSE: BK)
Warren Buffet first bought the Bank of New York Mellon Corporation (NYSE: BK) shares in 2010. The asset management and custody banking giant currently accounts for just over 1% of the portfolio valued at $2.4 billion. Its shares have been under pressure since the beginning of this year due to the pandemic and low-interest-rate environment.
Along with share price gains, the Bank of New York Mellon Corporation also offers a quarterly dividend to investors. The legendary investor likes to hold stocks that offer steady share price gains as well as growth in dividends. First Eagle Investment Management briefly talked about BK in its 2020 Q3 investor letter:
“The world’s largest custody bank, Bank of New York Mellon has been challenged by the persistently low-rate environment. While custody tends to be a wide-moat business, revenue generation is highly sensitive to net interest margins. Low rates have also hurt Bank of New York’s other primary line of business—investment management—as it has been forced to waive fees on its money market funds to preserve their net asset value.”
8. VeriSign (NASDAQ: VRSN)
VRSN ranks 8th in our list of the best long-term stocks to buy now. The Oracle of Omaha has been holding VeriSign (NASDAQ: VRSN) over the last eight years as shares of internet services and infrastructure provider has been soaring at a robust pace. It is the eleventh largest stock investment of Berkshire, according to the latest fillings.
Although VeriSign does not offer dividends, it is considered among the best growth stocks. The shares of internet services and infrastructure provider soared almost 135% in the last five years, accelerating ten years gains to almost 500%.
7. Charter Communications (NASDAQ: CHTR)
CHTR ranked 7th in our list of the best long-term stocks to buy now. The cable network company Charter Communications (NASDAQ: CHTR) has generated massive profits for Berkshire Hathaway in the form of share price gains. The shares of Charter soared almost 1500% since Buffett’s investment holding first initiated a stake in the second quarter of 2014. It currently represents Berkshire’s eighth-largest investment valued at $3.2 billion.
Charter’s strong performance is backed by its investment strategies. "We've added two million customer relationships in the past year and remain focused on executing a proven operating and investment strategy that works for customers, employees, and the communities we serve, creating shareholder value for the long term," Chairman/CEO Tom Rutledge said in an earnings conference call.
Avenir Capital said the following about CHTR in its 2020 Q3 investor letter:
“Charter was also a strong performer with the share price up over 22% over the quarter. Charter had a very strong second quarter with broadband customers up by 850,000 and video subscribers up by 102,000 (Charter hasn’t seen an increase in video subscribers since 2016). Adjusted EBITDA was up 7.3% and the company continued its program of share repurchases. Charter has performed well during the pandemic with the share price up 24% since the beginning of the year.”
6. U.S. Bancorp (NYSE: USB)
The fifth-largest American bank U.S. Bancorp (NYSE: USB) is the permanent member of Warren Buffett’s stock portfolio. The bank is currently the seventh-largest stock investment of Berkshire Hathaway, accounting for 2.07% of the portfolio. The investment holding first created a position in U.S. Bancorp in 2016.
Warren Buffett benefitted strongly from his US Bancorp investment both in the form of share price gains and dividends. Shares of the fifth-largest American bank have been under pressure over the past few quarters amid pandemic related challenges.
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Disclosure: No position. 15 Best Long-term Stocks to Buy Now is originally published on Insider Monkey.