1 Warren Buffett Stock to Buy and Hold Forever

Warren Buffett owns a lot of stocks. Which one is the best?

Jan 18, 2014 at 1:30PM

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So many choices! How do I pick just one? Photo source: Coca-Cola.

Perhaps no one's stocks ideas are more sought after than Warren Buffett's, the investor extraordinaire and CEO of Berkshire Hathaway. Heck, we even wrote an entire free report on the guy.

While Buffett's Berkshire is the holding company for a bunch of well-known business such as Geico, Fruit of the Loom, and Dairy Queen, it holds nearly $100 billion worth of stocks that everyday investors can buy. Since Berkshire's portfolio has more than 40 stocks, we asked three of our analysts to pick one of the stocks they think investors can buy today and hold for the rest of their lives.

Jordan Wathen: American Express (NYSE:AXP) takes my No. 1 spot for three reasons. First, in the processing business, it has charged the highest merchant fees of any processor for decades. Visa, MasterCard, and Discover Financial Services simply don't have the ability to charge a premium price for their services. American Express does, in part because it focuses on higher-income consumers.

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Photo: Georgetown University.

Secondly, American Express has an advantage is signing up new cardholders. Because American Express earns in two ways -- swipe fees, and fees and interest on credit card balances -- it can afford to spend more to capture new customers. Most credit card companies, like Capital One Financial, only earn from interest and penalty fees. So when it comes to promoting their products, American Express has a huge advantage in that its customers are inherently worth more over time.

Finally, the company is a "cannibal" -- a true Charlie Munger stock that eats itself over time by buying back its own shares. In the past 12 months, the company repurchased 4% of all shares outstanding. As it matures, more capital will likely flow back to shareholders through a combination of dividends and repurchases. With average returns on equity over the past two years topping 20%, the company is a consistent cash cow that can afford to reward shareholders for years to come, making it the perfect buy-and-hold Buffett stock.

John Maxfield: Reading Berkshire Hathaway's 13F -- a form that discloses an investment manager's holdings of publicly traded stocks -- is a bit like touring the pantheon of American business. In it, you'll find large holdings of Coca-Cola, ExxonMobil, Wal-Mart, Procter & Gamble, and Wells Fargo, among others, all of which are exceptional businesses that have rewarded shareholders handsomely throughout the years.

But if a person were to choose only one stock in this portfolio to buy today and hold forever, it's critical to look into the future and not the past. This precludes, in my opinion companies like Wal-Mart and, to a lesser extent, Berkshire's vast holdings of energy stocks -- in addition to ExxonMobil, Buffett's company holds large positions in Phillips 66, ConocoPhillips, and National Oilwell Varco.

This isn't to say that companies like these are certain to be bad investments. Indeed, if I were a betting man, I'd guess they'll perform admirably over years, if not decades, to come. Yet it doesn't take a wild imagination to conclude that the tide is turning against the likes of Wal-Mart and ConocoPhillips thanks to innovative technologies introduced by companies like Amazon.com and Tesla Motors.


Photo: UPS.

The most ideal stock in Berkshire's portfolio, in turn, is one that marries the old and the new -- one that has proved its mettle but still has arguably its best days ahead. And it's for this reason that I'd choose UPS (NYSE:UPS).

There are three things I feel comfortable predicting. First, the population of the United States will continue to expand. Second, our economy will continue to be fueled by the consumer. And third, our purchasing habits will continue to migrate in favor of e-commerce. Together, these factors seem to cement a positive trajectory for UPS going forward -- absent, of course, Amazon's dream of delivery drones, but that entails another discussion altogether.

Patrick Morris: I'd choose General Electric (NYSE:GE).

Although it is one of the smallest positions in the Berkshire Hathaway public portfolio, standing at only $14 million, or 0.02% of the total, I think it is the best for the long haul. When you consider Buffett had no qualms buying $3 billion of GE during the height of the financial crisis, I also don't think Buffett would bat an eye at my decision, either.


Since we're talking about forever, I'm not going to dive into the current valuation -- although it is compelling -- but instead just look at the broader business. Consider that GE currently has eight business lines, across a wide range of businesses, and it has one of the most diverse revenue streams imaginable.

When I look at GE, I see a company that was brought into being by one of the greatest American minds in Thomas Edison, and has molded itself through the years to one that the essentially mirrors the American economy itself. One of the surest ways to ensure investment success is through diversification, dividends, and disciplined management and GE provides perhaps the greatest example of those things in a single company.

Many people have said that an investment in Berkshire Hathaway is like that of an index fund, but it can be argued that it's even more the case with GE. Buffett once said: "Buy American. I am." And you would be hard-pressed to find a company that provides a better example of that phrase than GE, which is why I would hold it forever.

Go beyond his stock picks
Warren Buffett has made billions through his investing, and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Fool contributors John Maxfield and Jordan Wathen have no position in any stocks mentioned. Fool contributor Patrick Morris owns shares of Amazon.com, Coca-Cola, Discover Financial Services, Berkshire Hathaway, and General Electric. The Motley Fool recommends Amazon.com, American Express, Berkshire Hathaway, Coca-Cola, MasterCard, National Oilwell Varco, Procter & Gamble, Tesla Motors, UPS, Visa, and Wells Fargo and owns shares of Amazon.com, Capital One Financial, Coca-Cola, General Electric, Berkshire Hathaway, MasterCard, National Oilwell Varco, Tesla Motors, Visa, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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