My 2 Best Buffett Stocks to Buy and Hold in 2022 (and Beyond)

Warren Buffett is without a doubt one of the greatest stock pickers and business minds of our time. During his tenure as CEO of Berkshire Hathaway, he has used the holding company to fund a variety of acquisitions and investments, building an empire that has created tremendous wealth for shareholders. In fact, since 1965, Berkshire stock has generated annualized returns of roughly 20%, crushing the S&P 500.

The secret to Buffett's success cannot be summarized in a single sentence, but he once explained his investment philosophy like this: "In business, I look for economic castles protected by unbreachable moats." In other words, he likes to invest in businesses with a durable competitive advantage. Apple (AAPL -0.35%) and Visa (V -0.23%) are perfect examples. And while both companies have already achieved immense success, their stocks are still worth buying today.

Here's why.

Image source: Getty Images.

1. Apple

Apple has cultivated an incredible brand image. Its capacity for innovation and lineup of trendy devices -- from iPhones and AirPods to M1-powered MacBooks and iPads -- consistently drive demand among consumers. Apple reached an all-time high of 1.8 billion active devices during the most recent quarter, and each of its major products ranked as the industry leader in terms of customer satisfaction.

Of particular note, iPhone satisfaction hit 98% in the latest survey from 451 Research, driven by the wildly popular iPhone 13. In the most recent quarter, Apple captured a 22% market share in smartphone shipments, which puts the company four percentage points ahead of second-place Samsung.

Not surprisingly, Apple's popularity with consumers has translated into strong financial results. Despite its titanic size, the company has grown its top and bottom lines quickly over the past four years.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate. Note: Q1 2022 ended Dec. 25, 2021.

Apple's services businesses -- a segment that includes Apple Pay, the App Store, and subscription products like Apple TV+ and Apple Music -- has become a critical part of its growth strategy, as it allows the company to better monetize its massive user base. And Apple's most recent innovation in this space is Tap to Pay on iPhone, a platform that allows merchants to accept payments from contactless cards and digital wallets without any extra hardware. Developers can also integrate the product into other payment platforms and mobile apps. Payment processor Stripe will offer Tap to Pay on iPhone to its clientele (which includes Shopify) starting this spring.

More importantly, Apple's services segment generated record revenue of $19.5 billion in the first quarter and a gross margin of 72%. That's significantly higher than the 38% gross margin in its products business. Going forward, Apple should become increasingly profitable as its service business scales. That's why this Buffett stock is still worth buying.

2. Visa

Brand recognition and trust are critical in the financial industry. When a consumer uses a payment card at checkout, the merchant must trust that their account will be credited. And Visa has earned the trust of businesses around the world. Its payment cards are accepted at 80 million merchant locations, and its technology powers approximately 40% of all purchase transactions. That makes Visa the world's largest payments network, and that scale gives the company a significant advantage.

Merchants are essentially obligated to accept Visa, and it would be virtually impossible for a smaller rival to dethrone the company -- its payments network already connects to thousands of financial institutions, millions of merchants, and 99% of bank accounts in 88 countries around the world. A rival would have to spend billions to build out a similar network, during which time Visa could adjust its prices to put pressure on the competition. Even fintechs like PayPal and Block rely on Visa's payment infrastructure to some extent. That ironclad competitive position has translated into strong financial results over the long term.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate. Note: Fiscal Q1 2022 ended Dec. 31, 2021.

Looking forward, management sees plenty of room for growth. For instance, cash and check still account for $18 trillion in consumer payments each year, so the company is working to expand access to Visa payment credentials. To add, Visa also facilitates other types of transactions, such as business-to-consumer and business-to-business (B2B) payments. Collectively, those represent an even larger market, at $185 trillion. Products designed to capitalize on that opportunity -- Visa Direct and Visa B2B Connect -- are gaining traction with businesses. Visa Direct transactions grew 35% in the most recent quarter, and B2B payment volume grew 28%.

In short, Visa's addressable market exceeds $200 trillion -- a figure that is 18 times bigger than the $10.9 trillion in payment volume Visa handled over the last 12 months. That's why this stock looks like a smart long-term investment. And with travel returning to normal and cross-border payments volume on the rise, now looks like a good time to buy.