Do you have $1,000? 5 Buffett stocks to buy and hold forever
At Warren Buffett’s Berkshire Hathaway wallet has been attracting attention for decades. Its average annual return of 20% since 1965 has doubled the performance of the S&P500.
Despite this performance, not all shares held by Buffett are bought today. Nevertheless, Buffett and his team continue to add actions. To that end, investors should pay particular attention to five of Buffett’s key additions in recent years, all of which are affordable within a $1,000 budget.
Apple (AAPL -0.47%) has become one of the most recognizable brands in the world. His iPhones, Mac computers and wearables became highly sought after by consumers, and Buffett came to appreciate the value of these offerings over time. As a result, it served Apple and Berkshire investors so well that it outperformed the S&P 500 at a time when many tech stocks fell more than 75%.
Despite its market capitalization of $2.75 trillion, Apple has managed to achieve high-single-digit revenue growth in a slowing economy. Additionally, its $191 billion cash position gives it one of the strongest balance sheets among public companies. Given these attributes, it’s no wonder that Apple stocks make up more than 40% of Berkshire’s portfolio.
Snowflake (SNOW -5.48%) is a fast-growing software stock that contrasts with Buffett’s more notable investments. It is a high-growth, money-losing stock, having lost $166 million in its fiscal first quarter of 2023 alone. Additionally, the price-to-sales (P/S) ratio of 36 is overstated by Buffett’s standards and would be much higher if not for the 40% decline in stock prices over the past year.
However, its position as the premier data cloud provider could make it the kind of essential offering that Buffett typically likes to see in a business. Moreover, his customer count of 6,300 indicates that he has barely scratched the surface of his potential. Between its 40% year-over-year customer growth and 74% increase in customer spending over the past year, Snowflake is on track to more than justify its high cost.
Despite the increased emphasis on clean energy, oil and natural gas account for 68% of energy consumption in the United States. It benefits Chevron (CLC 0.30%), which derives more than 99% of its revenue from these energy sources. Its business is so profitable that it recorded $16.7 billion in free cash flow in the first half of 2022.
This cash flow funds a growing dividend stream, a factor that likely attracted Buffett. Its annual dividend of $5.68 per share yields 3.6% and has increased for 35 consecutive years. And at a dividend cost of $5.5 billion in the first half of the year, cash flow should support further increases. Moreover, with a P/E ratio of just 11, income investors might consider following Buffett’s lead.
Bank of America
Buffett’s interest in banks is not new. However, the size of his Bank of America (BAC 0.07%) position has steadily grown in recent years. At 10%, this is Berkshire’s second position after Apple. It is also a megabank that has aggressively adopted fintech solutions. CEO Brian Moynihan told Yahoo! Finance last year the company spends about $3.5 billion a year on technology-driven products and services.
In addition, the company pays an annual dividend of $0.88 per share, good for a yield of around 2.4%. Its annual payout has increased every year since 2014. Given that the cost of this dividend claimed $4.2 billion of its $13.3 billion in net income during the first half of 2022, the payout should easily hold its own. . At 11 times earnings, investors can buy this income stream cheaply.
Despite the slow growth of e-commerce, Amazon (AMZN -0.08%) is a stock that Buffett investors may want to buy and hold forever. Its cloud segment, AWS, generated 100% of the company’s operating revenue this year, despite only accounting for 16% of revenue in the first half of 2022. Additionally, its digital advertising segment continues to grow to double digit rates.
Still, that potential doesn’t necessarily mean it’s been one of Buffett’s best-performing investments in recent months. Amazon has fallen 13% over the past year, and its 127 P/E ratio is hardly cheap.
However, Buffett likely likes AWS’ 12-month operating margin of 31%, a stark contrast to negative margins in its retail segments. According to Grand View Research, cloud infrastructure is expected to grow at a compound annual growth rate of 16% through 2030, a factor that should keep Amazon growing even as e-commerce slowly recovers.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Bank of America is an advertising partner of The Ascent, a Motley Fool company. will heal holds positions in Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway (B shares) and Snowflake Inc. The Motley Fool recommends the following options: long January 2023 calls $200 on Berkshire Hathaway (B shares), long March 2023 calls $120 on Apple, $200 short January 2023 put options on Berkshire Hathaway (B shares), $265 short January 2023 calls on Berkshire Hathaway (B shares) and 130 short calls $ of March 2023 on Apple. The Motley Fool has a disclosure policy.