1 Warren Buffett Stock to Buy and Hold Forever

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.

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.


Read/Post Comments (20) | Recommend This Article (85)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 21, 2014, at 5:05 PM, Loafer78 wrote:

    You may want to read the "sentences" during proof reading before sending the article out. I'm no English professor, not even close, but some just aren't of the quality that I know you intended them to be. Just saying...

  • Report this Comment On January 21, 2014, at 6:24 PM, cmalek wrote:

    Forever is an awfully long time during which a lot can happen. Besides, isn't the idea of investing to make money? If a stock is held forever, no matter how much it appreciates, you can never realize any gains from it.

  • Report this Comment On January 21, 2014, at 8:28 PM, piccadilly1234 wrote:

    Why not just buy BRK-A or B and you will get benefit of all these stocks. And you get diversity at the same time.

  • Report this Comment On January 22, 2014, at 3:21 AM, blake6572 wrote:

    Forever is a long time to hold a stock but there are ways to make money holding a stock. Many pay quarterly dividends, there could be stock splits in the form of a cash payout, and ultimately you can sell the stock at your discretion. And I agree with piccadilly if you want to invest like buffet buy Berkshire Hathaway stock.

    Blake

    <a href="http://topstockpickstoday.blogspot.com">Top Stock Picks Today</a>

  • Report this Comment On January 22, 2014, at 11:45 AM, pondee619 wrote:

    "ultimately you can sell the stock at your discretion"

    YES, and, therefore, you are not HOLDING THE STOCK FOREVER. Someday the fool will write articles geared for people. People can not hold stocks forever and have those holdings do them any good. Particulaly if " I agree with piccadilly if you want to invest like buffet buy Berkshire Hathaway stock" which does not split its stock nor pay a dividend. You can starve holding Berkshire Hathaway stock forever.

  • Report this Comment On January 22, 2014, at 5:28 PM, WISEWORD wrote:

    This article is illiterate. Get a copy editor. Or fire someone.

  • Report this Comment On January 24, 2014, at 6:47 AM, dbtheonly wrote:

    cmalek, pondee,

    You can not hold a stock forever. You will only last a set amount of time.

    Criticizing an obviously hyperbolic phraseology shows a picayune-ish-ness that will not serve you well.

  • Report this Comment On January 24, 2014, at 7:35 AM, cmalek wrote:

    @dbtheonly:

    "Criticizing an obviously hyperbolic phraseology shows a picayune-ish-ness that will not serve you well."

    And obviously hyperbolic phraseology sounds like the same blather we hear all the time from sketchy "financial advice" purveyors. If MF writers want to be taken seriously, they should refrain from "obviously hyperbolic phraseology". It strains the readers' credulity and MF's credibility. When there is hyperbole in the title, how are we to know that there is no hyperbole in the analysis?

    If I want hyperbole, I listen listen to Jim Cramer. From MF I expect better.

  • Report this Comment On January 24, 2014, at 11:21 AM, sagitarius84 wrote:

    The one Buffett stock to buy and hold forever is Coca-Cola:

    http://www.dividendgrowthinvestor.com/2014/01/coca-cola-wide...

    It is a wide moat company, has strong brands, global scale and growth potential.

  • Report this Comment On January 24, 2014, at 12:06 PM, pondee619 wrote:

    Thank you, cmalek. It's clear you don't write for the fool.

    dbtheonly: If "You can not hold a stock forever" why do the fool writers keep telling us to do so?

    "and hold for the rest of their lives"

    "only one stock in this portfolio to buy today and hold forever"

    "Since we're talking about forever, I'm not going to dive into the current valuation" Disregard current valuation because we are talking about FOVEVER!

    Employing "hyperbolic phraseology" in disregarding current valuation "will not serve you well" in making your investment decisions.

    "hyperbolic phraseology," obvious or not, has no place in a serious discussion about ones future financial health and well being. Lets leave "hyperbolic phraseology" to the hucksters, the pumpers and dumpers, the pettyfoggers and frauds. Lets have the words of Fooldom ring true, accurate and straight forward. In short cut the BS and give it to us straight.

  • Report this Comment On January 25, 2014, at 10:52 AM, ChuckXX wrote:

    I personally think the 2 best buy and hold stocks forever are Visa and Mastercard. Because they reach the masses and don't charge a fee for the priviledge of having the card.

  • Report this Comment On January 25, 2014, at 3:01 PM, LDTEX3 wrote:

    Ok, so we buy BRK-B, Buffet buys the stocks and keeps the dividends.

  • Report this Comment On January 25, 2014, at 3:12 PM, LDTEX3 wrote:

    Lacking immortality, I am investing to meet my needs for my lifetime. The excess, hopefully there will be, shall be donated in a manner in which to benefit mankind (cancer research etc.) at least until the earth falls into the sun, as it ultimately will.

  • Report this Comment On January 25, 2014, at 11:24 PM, whyaduck1128 wrote:

    When The Great Oracle says things like, "My favorite holding period for a stock is forever", TMF goes all orgasmic at The True Wisdom. When a Fool writer uses the term "forever", people jump all over him/her/it. Why is that?

    And speaking of paradoxes, why is it that dividends, splits, and repurchases are so good when done by the companies BRK owns, but so bad when someone proposes that BRK do it itself?

  • Report this Comment On January 26, 2014, at 10:11 AM, tedwarrenlives wrote:

    Do we really trust these guys on Wall St., even a Warren Buffet; I really don't after the MFS Corzine debacle a Governor and a Senator. SAC Capital - GUILTY. Barclay's - RATE RIGGING -GUILTY. The list goes on forever, truth be told.

    How many Congressional tip offs do you hear about on Wall St? Many, unless your deaf or removed from there.

    The SEC needs to have their budge 10X before they even begin to deal with the corruption on Wall St.and 50X if they want to clean up the PINK SHEETS. For now the SEC is a JOKE to them and will remain to be. How do you trust the SEC to purge corruption if the men in charge with the handshaking at Capital Hill are major players of the corruption?

    I wish the FOOL EDITOR would take his head out of the sand and address such issues, instead of the nonsense "87% think the market is rigged and they are fools", He is NAIVE or mis-leading with such statements, will all due respect.

    Tom and Dave should have pulled the plug on that campaign a long time ago for that headline.

  • Report this Comment On January 26, 2014, at 12:11 PM, DonkeyJunk wrote:

    If you can't understand the idea of identifying a company that is indispensable to the economy, or possess a very wide moat, justifying a position with a very long horizon, then your investment strategy will not fit with the long-term philosophy of Buffett or Fool.com and you should go somewhere else for your investment advice. You really don't belong here and your complaints come across as insipid to those who do understand the value of long-term investment.

  • Report this Comment On January 26, 2014, at 6:04 PM, The1MAGE wrote:

    piccadilly1234,

    If you buy Berkshire, you will do as good as Berkshire, but if you choose the best of the Berkshire holdings, you could do better then Berkshire does.

    LDTEX3,

    You said, "Ok, so we buy BRK-B, Buffet buys the stocks and keeps the dividends."

    No, Berkshire buys the stock, and Berkshire keeps the dividend, and then uses that dividend to buy more stock, benefiting Berkshire. Buffett really makes his money through Berkshire, and his net worth is 98% in Berkshire. In other words if he makes money, we make money.

    Yes he gets a paycheck from working at Berkshire, but at $100K is one of the lowest of practically any CEO of a large company. In comparison, Bernardo Hees, who was hired to run Heinz, which is half owned by Berkshire, makes over $2m a year. Although he is still vice chairman of Burger King, so this may include income from both positions.

  • Report this Comment On January 26, 2014, at 10:35 PM, LDTEX3 wrote:

    Yes indeed Pic. I am well aware of this.

    I prefer to collect and reinvest the dividend myself.

    Cheers!

  • Report this Comment On January 27, 2014, at 4:00 AM, ashleyjames389 wrote:

    One thing i've learned from my 10 years experience, do whatever warren buffet does if you want good returns! that guy is never wrong

    http://bit.ly/BuffetStocks

  • Report this Comment On January 28, 2014, at 12:09 PM, foollady1 wrote:

    Am. Express is not the only card with high merchant swipe fees. Other credit card merchant fees have gone up in the last few years, so much so that several places I go now won't even take credit cards--hair and nail salons. They don't want to charge higher fees in order to keep customers.

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