When it comes to investing success, it's hard to beat the results of Warren Buffett. During his tenure as CEO of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), the Oracle of Omaha has racked up an unrivaled track record. Since he took the helm of the company in 1965, its stock has generated a compound annual growth rate (CAGR) above 20%, and closed out 2019 with total returns of 2,744,062%!
On this clip from Motley Fool Live, recorded on Feb. 18, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Brian Withers select three stocks from Berkshire Hathaway's portfolio that investors should consider buying now and holding for the next 10 years.
Jason Hall: Yesterday, we talked about Berkshire Hathaway's 13F. The two big investments that jumped off the page were Verizon Communications and Chevron, the big integrated oil and gas company. Bought like $12 billion combined between those two.
What I wanted to do today is to take a little different approach. Let's all look at that whole portfolio, $200 billion-plus that Berkshire owns. Name one stock in the Berkshire portfolio that you'd buy right now and hold for a decade. Brian Withers.
Brian Withers: Buffett's investing style is a little bit different than mine. I was going through and Mondelez, and Procter & Gamble, and Kraft, and then just like, I'm not excited, and then I got down to the S's and then there's Snowflake (NYSE:SNOW). I'm like, there you go.
Hall: It is. Is that Ted Weschler? I think it was maybe Todd Combs, one of his lieutenants that made that investment, but go ahead. I knew that's where you were going to go here.
Withers: Of all these other ones, Snowflake is a little bit of a high-risk, high-reward stock. Its run-up, the price is, it's extremely pricey right now. But if you're going to hold it for 10 years, what that business does and the product that they provide customers, that's the Wayne Gretzky thing, that's where the puck is going. Having your data in the cloud is a long-term trend, I think Snowflake will benefit over the long term. I don't own it yet. I'm still stuck on the valuation -- yes, Jason, I'm actually stuck on the valuation.
Hall: You know I bought that one on the day of the IPO.
Withers: Yeah, I know.
Hall: You heard that story.
Withers: I can't believe I'm behind Jason on this one, but [laughs] they're a really cool company, they got a lot going for him. If you're interested in the buy one share, buy half a share, just watch and see what happens.
Hall: That's great. I knew you'd go there, but it's [laughs] absolutely great. Danny Vena, what do you got here? What's your one stock in the Berkshire portfolio that you'd buy right now on hold for a decade?
Danny Vena: Anybody that has heard me talk on this program about stocks in general, this will be no surprise to anyone. I would buy Apple (NASDAQ:AAPL).
Apple is a company that has a long-term track record, this is a company that just released its biggest iPhone ever [and] they've got a two- to three-year refresh cycle in front of them. We're talking about the largest percentage of wearables revenue and the largest percentage of services revenue last year than any previous year.
The fact that they're going to sell probably in the neighborhood of 350 million iPhones over the next couple of years with this new refresh cycle, folks get an iPhone 12 and the next thing you know, they are signing up for more services, they're buying more wearables to go along with it.
This is the company that Buffett loves. Buffett loves it so much, he said, "I own 5% of the company, I'd own 100% of it if I could."
This is not recent business. When you talk about what's happened with the most recent 13F, what's you are seeing is that they sold off just a little bit of it. They do that pretty much every quarter so that they can keep the amount of the value of the stock below regulatory limits for reporting purposes. I don't think when you see those small sales, don't take that as a sign that Buffett loves Apple any less.
Then also, I'll mentioned and then we'll move on, but Apple has doubled its dividend since 2012, the value of the dividend is up 116%, even though it's got a very low yield. If you're looking for a stock that you want to buy and hold for the next 10 years, I don't think you can go wrong with that.
Hall: I think there's some interesting things here with Apple, it's like the perfect Buffett stock. It's his Coca-Cola part 2 because it's a company with an incredibly powerful brand, and that brand is a durable competitive advantage that allows the company to generate enormous cash flows, that it then returns to investors with a meaningful dividend that it increases regularly.
By the way, when the company also has a pretty aggressive share repurchase program, that's the trifecta for Berkshire. I mean, that's Buffett's, three favorite things right there. Absolutely.
It's not even close that this is Berkshire's most successful, even only as owned for five or six years. This is Berkshires most successful single investment, generate more dollars and returns than any other investment in the company's history.
Hall: Ever. Guys, I am going to say of all the stocks in the Berkshire Hathaway portfolio. It's almost a tie for me between Visa and MasterCard (NYSE:MA), but I'm going to lean MasterCard, ticker MA.
The reason I am going to go this way is because I think in terms of digital payments, electronic payments, the growth of the global middle-class, there are few companies as well positioned as MasterCard is.
No. 1, it has a massive global position already with its payments network and huge, powerful competitive advantage and the network effects there because merchants want to accept MasterCard because they want shoppers to go there. Shoppers want to carry a MasterCard because they want access to easy payments at all of the merchants that they prefer. Banks want to offer MasterCard because they want access to the customers who are shopping, and they need to have a payment network that's going to be connected to the merchant. It's this three-legged stool that all three legs are really important and the more merchants, the more shoppers, the more financial institutions or partners, it strengthens all three legs of that stool.
This is a company that's not at risk from the growth of other kinds of payment platforms because a lot of them still ended up getting routed through MasterCard's payment network.
I think it's something that people are also sleeping on because you think, wow, everybody has a card in their pocket, everybody does and everybody in developed countries do. But around the world, cash is still king, electronic payments are becoming more and more important as the global middle-class grows.
Here's the big one to me, retail commerce is like, I don't know, maybe 25% of the global money-moving market. The company, you start looking at business-to-business transactions, you start looking at cross-border transactions, you start figuring out all of these other ways, the money gets moved between parties, and it makes the opportunity something like $150 trillion, $160 trillion versus the $40 trillion opportunity for the merchant services kind of stuff that they do now. It's an enormous opportunity.
It's also a stock that hasn't performed very well, it's basically flat over the past year because its business has suffered because of the economic implications of the coronavirus pandemic. I think post-COVID, when people start getting out and returning more to our normal way of living and doing commerce, I think MasterCard's business is going to continue to deliver double-digit growth, and the dividend is going to grow by double-digit rates, and it's going to be a winning stock for the next 20 years.