3 Warren Buffett Stocks to Hold Forever

Rebecca French

5 months ago

Beverage giant Coca-Cola is one of Berkshire Hathaway’s longest-held and largest companies.
You know Amazon is an e-commerce giant, but that’s not why it has such a bright long-term future.
Google parent Alphabet has proven that it is willing and able to successfully build or acquire businesses to expand its ecosystem for digital consumers.
10 stocks we like better than Amazon ›

An era is coming to an end. After 55 years at the helm, Warren Buffett will step down at the end of the year Berkshire Hathawayof (NYSE: BRK.A) (NYSE: BRK.B) CEO and Chief Stock Picker.

When he leaves, many members of the investment community may find themselves overwhelmed. Although Berkshire is more than just a mutual fund, many investors have followed Buffett’s lead and copied Berkshire’s trades. Now, the group’s stock picks aren’t necessarily Buffett-approved holdings. So, if you want to know for sure whether you’re following in his footsteps, it’s best to act quickly.

To that end, here are three names currently in Berkshire Hathaway’s portfolio that not only you know the Oracle of Omaha would love to own, but each one is safe to buy and hold forever.

Warren Buffett. — Image source: Motley Fool.

Coca Cola (NYSE:KO) It’s not just one of Berkshire’s longest-held positions (19 years). It also became the group’s third-largest holding, now worth $28 billion. This represents 10% of Berkshire’s entire publicly traded portfolio.

It’s not hard to see why Buffett has been a long-time fan of the beverage giant. Not only is it the biggest and most well-known brand in the industry, but it’s also a dividend machine! In addition to decades of consistent dividend payments, The Coca-Cola Company has increased its per-share dividend payments for 63 consecutive years (and counting). This year, Berkshire’s 400 million KO shares will provide Buffett and his deputies with more than $200 million in cash. Not to mention that the stock’s price alone has increased nearly 200% since Buffett first bought back the stock in late 2006.

It’s also a great “forever” stock for two other reasons. One of them is that the world always needs a drink. With brands like Gold Peak tea, Powerade sports drinks, Minute Maid juices, Dasani water and, of course, its namesake Coke, The Coca-Cola Company has something to offer everyone.

Another reason why this name has staying power and is worth buying? Its sheer size (pronounced “deep pockets”) — the beverage giant has the ability to spend more money than its competitors. To put things into perspective, Coca-Cola spent more than $5 billion on advertising last year alone.

No, that’s probably not fair. However, investors don’t want a fair fight. They want the companies they own to have an unfair advantage over the competition.

Yes, Berkshire Hathaway owns shares on Amazon (NASDAQ: AMZN). Mind you, that’s not a huge stake – there are currently only 10 million shares, worth about $2.2 billion. This is less than 1% of the group’s total holdings.

Still, the fact that he’s willing to let Berkshire Hathaway own any Amazon is noteworthy, if only because Buffett typically steers clear of such flashy tech stocks, explaining that he doesn’t always fully understand the companies’ business models. To be sure, this choice may have been encouraged by Todd Combs and/or Ted Weschler, who help oversee the group’s equity stakes.

However, this choice makes more sense to Buffett now than it did a few years ago.

While Amazon may have been unknown in its infancy (the internet itself was still young and still evolving), and When Buffett formed his previous views on most tech stocks), even he had to agree that the uncertainty no longer applied. E-commerce is clearly here to stay, and Amazon clearly leads the e-commerce market at least in the U.S.; it’s not doing too badly overseas either. All told, despite the company’s already massive size, product sales grew by more than 8% in the first three quarters of this year. Growth also accelerated last quarter despite economic downturns at home and abroad.

Amazon is no longer just about e-commerce, either. Although it accounts for only a small portion of its revenue, its cloud computing arm, Amazon Web Services, contributes about 60% of the company’s total operating income. The cloud computing industry is here to stay, too. In fact, Straits Research predicts that the global cloud computing industry will grow from less than $1 trillion this year to nearly $3.7 trillion annually by 2033.

However, what makes this name such a great forever hold is that — unlike Berkshire Hathaway itself — Amazon has proven that it’s willing and able to adapt to an ever-changing market of opportunities.

last added letter (Nasdaq: Google) (Nasdaq: Google) Add to your list of Warren Buffett stocks to buy for yourself and hold forever.

Berkshire’s positions on Amazon and Alphabet actually have several clear similarities. For example, a few years ago, neither company was likely to be considered a potential option, but at the same time, both companies’ businesses have clearly solidified. Both companies are also nimble; Amazon incorporated cloud computing into its business a few years ago and is now turning its online shopping platform into an advertising medium, while Alphabet has moved far beyond its Google search engine, with profit centers like YouTube and its own cloud computing services. Berkshire Hathaway doesn’t have a large stake in either company, currently holding just 17.8 million shares worth about $5.5 billion. This is less than 2% of the group’s total holdings.

It’s a safe bet that this position was the result of a push from either Todd Combs or Ted Weschler.

Regardless, Buffett’s pseudo-endorsement of Alphabet gives you a green light to get into the company that still handles 90% of the world’s web searches (according to Statcounter).

However, this is not the main reason why Alphabet is such a worthy long-term investment. The biggest and best bullish argument here is a more philosophical one. Such is Alphabet’s willingness and ability to build or acquire businesses, any business that expands its digital ecosystem.

YouTube is one example; Google acquired it back in 2006. Alphabet’s chat-based AI platform Gemini is another example, as is Gmail, launched in 2004, and mobile operating system Android, acquired in 2005, which Statcounter says is installed on 72% of mobile devices worldwide.