Which person first comes to mind when you think about long-term investing? I suspect that for many of us, the answer would be Warren Buffett. The 92-year-old multibillionaire is, of course, one of the most famous investors ever. He has also promoted a long-term investing mindset for most of his life.
Unsurprisingly, quite a few of the stocks that Buffett has added to Berkshire Hathaway (BRK.A +0.21%) (BRK.B +0.21%) through the years are good picks for long-term investors. Some are better than others, though. Here are the three best Buffett stocks to buy for the long haul.
1. Berkshire Hathaway
I think arguably the best Buffett stock to buy for the long haul is Berkshire Hathaway itself. In Buffett's latest letter to Berkshire shareholders, he noted that the stock delivered a compounded annual gain of 20.1% between 1965 (when he took control) and the end of 2021. By comparison, the S&P 500 generated an average annual return of 10.1% during this period.
Berkshire is continuing to outperform the S&P 500 in 2022. Although the stock is down a little year to date, it's still well ahead of the overall market.
NYSE: BRK.B
Key Data Points
This impressive track record isn't the main reason why I like Berkshire going forward, however. Instead, my favorite thing about the stock is the diversification that it provides. You don't just buy one business when you invest in Berkshire Hathaway -- you buy a big basket of businesses.
Berkshire has more than 60 subsidiaries that operate in multiple industries. It owns equity positions in over 40 other publicly traded companies. Not all of these businesses will perform well over the next three decades and beyond, but many of them will. Berkshire's diversification increases your chances of long-term success.
2. Markel
You can take nearly everything I said about Berkshire and apply it to Markel (MKL 0.76%). The main exception is that Markel hasn't delivered returns quite as impressive and for as long as Berkshire has. However, the stock has nonetheless been a big winner since its initial public offering (IPO) in 1986, generating a cumulative gain of around 12,000%.
Like Berkshire, Markel is beating the S&P 500 this year. And it continues to attract investors for some of the same reasons Berkshire remains popular.
NYSE: MKL
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Markel is so much like Berkshire that it's sometimes referred to as a "baby Berkshire." The company's core focus is on insurance (in Markel's case, specialty insurance). It's a holding company that owns subsidiaries in other industries. Markel also invests in a long list of other publicly traded companies, including Berkshire.
Co-CEOs Tom Gaynor and Richie Witt also have similar mindsets as Buffett and Berkshire vice-chairman Charlie Munger. In Markel's Q3 call, Gaynor said, "If markets were going down and we were steadily buying more equity securities and bonds with higher interest income and our own stock at lower prices, that would be fantastic." He then added, "We're buying." That's what Buffett's doing, too.
3. Apple
Buffett clearly loves Apple (AAPL 1.10%). He's stated in the past that it's "probably the best business I know in the world." Apple ranks as Berkshire's biggest holding, by far.
Sure, the tech stock isn't performing so great this year. Over the longer term, though, Apple has trounced the S&P 500. I think it can continue to do so.
NASDAQ: AAPL
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Apple's current headwinds will only be temporary. The company's iPhone ecosystem should remain highly profitable for a long time to come. Apple has plenty of growth opportunities ahead, including augmented reality, digital payments, and streaming.
The company probably won't be able to deliver the sizzling level of growth going forward as it has in the past. That's expected, considering that Apple is now worth more than $2 trillion. But it should remain a steady winner and could even be the ultimate Buffett stock for long-term investors.
