It can be exciting to pursue high-growth opportunities in the stock market, but these types of investments are the kind you'll probably want to monitor frequently. On the other hand, there are some stocks that you can buy to form an excellent base for your portfolio and then hold onto for years of worry-free returns.
With that in mind, here's why three of our contributors think you can buy Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), Amazon.com (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) and leave them alone in your portfolio.
A diverse investment portfolio all in one stock
Matt Frankel, CFP (Berkshire Hathaway): I've been asked many times what stock I would own if I could choose only one. And my answer is always the same: Berkshire Hathaway, the conglomerate led by none other than billionaire investor Warren Buffett.
For starters, Berkshire doesn't do just one thing. It owns a collection of more than 60 subsidiary businesses in industries such as insurance, consumer goods, private aviation, real estate sales, and many others. Most people are quite familiar with some of the brands Berkshire owns, including GEICO, Fruit of the Loom, Brooks (running shoes), Duracell, Dairy Queen, and Pampered Chef, just to name a few.
In addition, Berkshire owns a stock portfolio worth more than $200 billion, with the common stocks of more than 40 top-notch companies. Larger positions include Apple, Bank of America, American Express, and Coca-Cola, and the majority of stocks in the portfolio were chosen by Buffett himself.
The bottom line is that when you invest in Berkshire, you're not just investing in one company. You're really putting your money to work in over 100 different businesses. And, of course, you get one of the greatest financial minds of all time and his fantastic team making decisions with your money.
To be clear, Berkshire isn't likely to be a home-run stock, but it's one with strong, steady returns that you can buy and hold for decades to come.
The three "Prime" reasons to buy and hold Amazon
Matthew Cochrane (Amazon.com): It can be hard for investors to keep track of the many ventures Amazon enters. From Amazon Go, its convenience store sans checkout lines, to PillPack, the online pharmacy it acquired last year, and Twitch, its live video streaming service, Amazon seems to have its finger in more pies than one can feasibly count. Yet, while any of these services could one day grow into Amazon's next big thing, I would humbly suggest there are three lines of business that make Amazon as close as anything to a set-and-forget investment: Amazon Prime, Fulfillment by Amazon, and Amazon Web Services (AWS).
Amazon Prime is the subscription service that gives members perks such as free two-day shipping, access to video and music streaming services, special deals at Whole Foods, and a variety of other benefits. In 2017, Prime membership exceeded 100 million worldwide. The subscription model, offering convenience and security for a fee, makes Amazon's e-commerce platform far stickier than most online shopping sites.
In 2018, third-party sellers on Amazon sold about $160 billion worth of goods and services on Amazon's e-commerce site, representing about 58% of the total. These sellers were largely able to do this through Fulfillment by Amazon, the platform that allows third-party merchants to store their products in Amazon's warehouses and ship using Amazon's logistics and delivery infrastructure. It even processes returns and customer service requests.
Finally, AWS is Amazon's cloud platform, which, in 2018, pulled in more than $25 billion in revenue with $7 billion in operating income, all while growing at rates exceeding 40% for the past three years. This platform alone is worth hundreds of billions of dollars.
These three business segments are titans and will feed Amazon's other ventures of growth for years to come.
An Apple a day for your portfolio
Dan Caplinger (Apple): The essential components of a successful business are products and services that people want, a dedicated base of loyal customers, and the ability to squeeze the most profit out of its best ideas while also moving forward in new and exciting directions. Apple combines all of those favorable attributes within a single company, as the maker of iPhones, Mac computers, and a host of other electronic devices has climbed to the pinnacle of the tech world.
Apple has been able to reap huge profits from its success. With more than $110 billion in cash, the company recently delivered its seventh annual dividend increase and announced it would buy back $75 billion in stock, and operating cash flow remains healthy.
That said, Apple has its share of naysayers. Some believe that the lack of major innovation could weigh on its long-term future, while others point to trade tensions with China as another potential roadblock. A shift toward emphasizing higher-margin services like its App Store faces challenges of its own. Yet over time, Apple has been able to find ways to sustain the key assets it has going for it, energizing its user base to help it remain profitable.
Many investors are treating Apple right now as if it's doomed to eventual failure. Yet with so many resources at its disposal, counting Apple out would be a big mistake -- and it's a stock you can buy without worries about the long-term future.