Businesses that stand the test of time often display several characteristics, including leadership in an industry with major, long-term tailwinds and the ability to build and maintain a competitive advantage. To find such businesses, it may be worth looking at the stock picks of Warren Buffett's Berkshire Hathaway.
The Oracle of Omaha is known for his buy-and-hold approach to investing, and given his track record, the companies he chooses are at least worth considering. With that in mind, let's look at two holdings that are worth buying and holding onto forever: Bristol-Myers Squibb (BMY 0.12%) and Visa (V 0.62%).
1. Bristol-Myers Squibb
Bristol-Myers is one of the largest pharmaceutical companies in the world. The drugmaker's lineup includes lifesaving medicines in oncology, immunology, and more. The need for innovative therapies won't subside anytime soon, especially given the world's aging population. In the U.S., people 65 and older will make up about 25% of the population by 2060 compared to just 16% in 2019. Prescription drug use and spending on prescription drugs increase with age.
Image source: Getty Images.
That's why the need for the products that Bristol-Myers and its peers in the pharmaceutical industry provide will continue to grow for a long time. Also, the healthcare company benefits from patent protection for its medicines, which grants it some degree of pricing power for the time that the patents last. Bristol-Myers also has a rich pipeline that will allow the company to replace older drugs once their patents expire and sales for these products drop.
Investors will witness this dynamic in the next half-decade or so. Bristol-Myers' three best-selling products are cancer drugs Revlimid and Opdivo and anticoagulant Eliquis. In 2021, sales of Revlimid grew by 6% year over year to $12.8 billion. Eliquis' revenue came in at $10.8 billion, 17% higher than the year-ago period. And Opdivo's sales grew by 8% year over year to $7.5 billion. However, generic competition for Revlimid entered the U.S. market this year.
Further, Eliquis will lose patent protection in the U.S. and abroad in 2026, while Opdivo's patent exclusivity expires in the U.S. in 2028. Thankfully, Bristol-Myers has a portfolio of newer products that will take the mantle away from these older drugs. The company's newer lineup features anemia treatment Reblozyl, which first earned approval in 2019. Others include a potential treatment for symptomatic obstructive hypertrophic cardiomyopathy called mavacamten and a potential treatment for plaque psoriasis called deucravacitinib.
Both could land regulatory nods this year. Overall, Bristol-Myers estimates that it will generate north of $25 billion in revenue from its newer products by 2029. That should help smooth out the losses from such medicines as Revlimid, Opdivo, and Eliquis. In short, thanks to its strong lineup and solid pipeline, not to mention the industry's long-term tailwind, Bristol-Myers is in an excellent position to perform well for many years to come.
2. Visa
Visa is one of the leading payment networks in the world. The company helps facilitate credit card transactions and charges fees for these services. While several players compete with Visa, the industry outside of China looks pretty close to a duopoly that Visa shares with Mastercard. For instance, in the U.S., these two entities accounted for nearly 77% of credit card purchase volume in 2020. Visa alone had a 54% market share in this category in the U.S.
Further, Visa benefits from a solid competitive edge in the form of the network effect. The company's payment network becomes more attractive to businesses the more consumers join in and vice versa. Given Visa's leadership in this industry and its strong moat, it will be difficult for competitors to knock the company off its pedestal permanently.
Also, there is plenty of room left for growth. Credit card transactions have been replacing cash and checks for years now, and the trend is still on an upward trajectory. Visa sees an $18 trillion opportunity in this space.
The company generated $25.3 billion in revenue in the trailing 12-month period, representing a 19.3% year-over-year increase. While Visa may not grab the entire market at its disposal, even capturing a fraction of it will help the company substantially grow its top line in the coming years. That's why Visa still looks like it has plenty of fuel to provide market-beating returns in the coming decades.
