Warren Buffett, CEO of multinational conglomerate Berkshire Hathaway, is widely regarded as one of the greatest investors of our time. That means we can all learn a lot from his buy-and-hold approach to investing and perhaps even get some much-needed inspiration from his stock picks.
Buffett oversees his company's investment portfolio, and two stocks in there that are most definitely worth buying and holding onto today are drugmaker AbbVie (ABBV 1.06%) and tech giant Apple (AAPL -1.22%). Here's why.
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1. AbbVie
Pharmaceutical companies have the advantage of offering products that are always in demand. AbbVie's portfolio includes immunology drugs Humira, Skyrizi, and Rinvoq; cancer medicines Imbruvica and Venclexta; and schizophrenia treatment Vraylar.
In 2021, AbbVie's net revenue came in at $56.1 billion, 10.5% higher than the year-ago period. That's a solid top-line performance for a pharma giant. The drugmaker's adjusted earnings per share for the year increased 20.3% to $12.70. Note that AbbVie's Humira made up almost 37% of the company's total revenue last year.
That is a problem since the healthcare company will lose patent exclusivity for this medicine in the U.S. next year. Humira's loss of patent exclusivity in Europe back in 2018 significantly harmed its international revenue.
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Still, the company is prepared to deal with the inevitable revenue losses Humira will experience in the U.S. in the coming years. Skyrizi and Rinvoq are well on their way to earning approvals across most of Humira's indications, and they already have significant wins under their belt. In 2021, Sales of Rinvoq more than doubled to $1.7 billion while revenue from Skyrizi increased by 85% to $2.9 billion.
Skyrizi and Rinvoq seem well-equipped to fill the gaping hole that Humira will leave, but the company can count on its other products as well, including its Botox franchise. Many of the company's products boast patents that won't expire anytime soon. Plus, AbbVie has a pipeline with dozens of ongoing programs. Expect new approvals and label expansions to add to the company's revenue base routinely.
AbbVie's solid business helps support its excellent dividend track record. The company is part of the exclusive club of Dividend Kings, or companies that have raised their payouts for at least 50 consecutive years. And with an above-average yield of 3.74% and a conservative payout ratio of 42%, AbbVie looks more than able to sustain further dividend increases ahead.
That's just one more reason to purchase shares of this pharma giant. Overall, AbbVie looks like a solid company to hold on to through thick and thin.
2. Apple
Apple's iPhone has been immensely successful since it was introduced in 2007. The company remains a leader in this industry with a 22% share of the smartphone market in the fourth quarter of 2021. During its fiscal year 2021 (ended Sept. 25), Apple generated $192 billion in sales from its iPhone segment, 39.3% higher than the previous fiscal year.
Could Apple lose its dominance in the smartphone market? It wouldn't be the first time something like that happens. Apple itself played an instrumental role in the decline of BlackBerry's once-booming smartphone business starting in the late 2000s. Could other companies permanently dethrone Apple?
Image source: Getty Images.
Given how popular and powerful the company's brand has become, it is hard to imagine Apple no longer being one of the most prominent players in this field, at least for the foreseeable future. More importantly, though, Apple has leveraged its strong brand name and robust cash flow generation to invest in and grow its services business.
The company's services segment offers customers a range of products, including Apple Music, Apple TV+, Apple Pay, iCloud, and more. The great thing about this business is that it offers much juicier margins than the sale of hardware products such as the iPhone, tablets, and laptops. In other words, as Apple's services revenue grows -- and as it captures a larger share of the company's total revenue -- that will work wonders for the company's bottom line.
iPhone sales will likely remain strong for many more years, especially as Apple makes headway into various international markets. But the company's future is increasingly tied to its services segment, and that's something that should excite investors. Even with a $2.8 trillion market cap, Apple still has considerable room to grow. No wonder it is one of the largest holdings in Buffett's portfolio.
