Choosing stocks that you never have to sell has enormous advantages. If you choose well, it means you can let the investment compound in value for potentially decades. As Warren Buffett knows all too well, uninterrupted compound interest is the best way to build lasting wealth.
Since 1965, Buffett's investing skills have steered Berkshire Hathaway's shares to an awe-inspiring return of 4,384,748% through 2023. A key component of those returns was selected investments in stocks of strong companies in its $300-plus-billion equity portfolio. Let's look at two of its top stock holdings that can grow for decades.
Apple
Warren Buffett has a long history of betting big on strong consumer brands. Apple (AAPL 0.50%) has a loyal customer base that is willing to give up many other things before their iPhones. The stock has returned 531% since Berkshire first started buying the stock in 2016, which brought its stake to a value of $174 billion at the end of 2023.
Apple doesn't report high revenue growth every year. It tends to come in cycles, such as when the company releases a popular new version of the iPhone. But even in years when Apple reports a slight decline in revenue, it's still seeing the active installed base of devices continue to grow.
A growing installed base is very valuable to Apple, as people who own more than one Apple device tend to spend more on apps and subscriptions in the App Store. Although services make up a small percentage of the company's total revenue, it generates higher margins.
Across all products and services, Apple raked in $100 billion in profit last year. This allowed the company to return $27 billion to shareholders in dividends and share repurchases last quarter. Apple just raised the quarterly dividend by 4% to $0.25 per share and authorized an additional $110 billion in share repurchases.
Warren Buffett loves companies that have shareholder-friendly capital return policies, especially when those companies still have opportunities to keep growing. Analysts expect Apple's earnings per share to grow at an annualized rate of 10% over the long term. Investors may expect a return consistent with that estimate.
Mastercard
Mastercard (MA 1.12%) is one of the most recognizable consumer brands around. With billions of cards in people's wallets, the company has delivered consistent growth over the years that has made investors a lot of money. The stock returned 514% over the last decade, and because the global commerce market is so massive, Mastercard can grow the value of your investment for decades to come.
Consistent with its global growth opportunity, Mastercard's revenue grew 11% year over year in the first quarter, with adjusted net income up 16%. These results reflect management's ongoing push to grow the adoption of electronic payments and displace cash and checks. The traditional credit cards specialist is adapting to the increasingly digital global economy.
On that note, Mastercard secured more new deals in the quarter in the Americas, Asia Pacific, Middle East, Africa, and Europe. It's also making progress in contactless transactions, such as Tap to Phone, which allows businesses to accept payment from a mobile wallet or contactless card on an NFC-enabled device. Mastercard is already accepted in over 100 million locations worldwide, but management believes Tap to Phone can extend that opportunity even further.
The company's strong brand and huge growth opportunities explain why Berkshire Hathaway held nearly 4 million shares worth $1.7 billion at the end of 2023. Analysts expect Mastercard to grow earnings per share by 16% in the coming years, or enough growth to potentially double the share price in five years.
