When Warren Buffett purchased Berkshire Hathaway (BRK.A 0.60%) (BRK.B 0.77%) and became its CEO in 1965, he paid approximately $18 per share in the buyout. At the time, Berkshire was actually a struggling textiles company, but it would go on to become the foundation and namesake for one of history's most successful investment conglomerates. Today, the company's Class A stock trades at roughly $454,600 per share -- good for an increase of more than 2,525,400% over Buffett's initial purchase price.
A dedication to finding strong businesses worth buying and holding for the long term remains at the heart of Berkshire's incredible, market-crushing success, and the company's stock portfolio is a great starting point for those seeking worthwhile investment ideas. With that in mind, read on to see why taking a buy-and-hold approach to five Berkshire-held stocks could pay off if you have money available to invest.
Image source: The Motley Fool.
1. Amazon
While the market seems to be fixating on challenges for Amazon's (AMZN -1.67%) online retail business that will diminish earnings performance in the near term, the tech giant remains fantastically well-positioned for long-term success. E-commerce is typically a relatively low-margin business, but the company's Amazon Web Services cloud-infrastructure segment is on track to continue delivering high-margin revenue and sales growth for many years to come, and the company should emerge from the current batch of macroeconomic and expense-related challenges it's facing.
Crucially, Amazon has a nearly unrivaled track record when it comes to making forward-looking moves and delivering game-changing innovations. Improvements in automation and robotics will likely make the tech giant's online retail business significantly more profitable over time, and the company will have opportunities to continue branching into new product and service offerings that strengthen its overall strategic positioning. With the market taking a fearful stance on Amazon's near-term outlook, long-term investors have a worthwhile opportunity to build positions in this excellent company at a price that leaves room for impressive returns.
2. Apple
Apple (AAPL -1.23%) is currently generating roughly 80% of overall profits in the global smartphone industry, and it recently achieved the monumental feat of claiming more than 50% of overall sales in the U.S. market. If you consider how many other hardware manufacturers operate in the space and the fact that Apple's iPhones tend to retail at significant premiums compared to the competition, the strength of the business and brand should be immediately apparent. It's clear that Buffett is enamored with the company and its competitive advantages.
Apple stands as Berkshire's largest stock holding and accounts for a massive portion of the investment conglomerate's stock portfolio. The iPhone company's stock makes up roughly 42% of Berkshire's overall stock holdings, and Buffett has called Apple his company's third-largest business -- trailing only its railroad and insurance operations in terms of overall significance. He's also stated that Apple is probably the best business he knows of.
With its strong ecosystem of existing hardware devices and software and services, and the potential to branch into new categories including smart cars and smart-home products, Apple is positioned to continue shaping the tech sector for decades to come.
3. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM -2.98%) is one of Berkshire's most recent portfolio additions, and it's also one of the most important companies in the world. TSMC is the leading fabricator of chips, producing roughly 56% of semiconductors worldwide and more than 90% of high-performance chips.
Berkshire's investment in TSMC last quarter immediately made the chip fabricator the investment conglomerate's 10th largest stock holding. Trading at roughly 12 times this year's expected earnings, the semiconductor giant looks attractively valued and has competitive advantages that should help it deliver wins for investors.
TSM PE Ratio (Forward) data by YCharts
Despite countries around the world pouring billions of dollars into improving their own domestic chip manufacturing capabilities, it's very unlikely that anyone will come close to seriously challenging TSMC anytime soon. Even chip companies with fabrication capabilities, including Intel and Samsung, turn to TSMC for some of their manufacturing needs, and it has technology, engineering, and scale advantages that should help it remain at the forefront of the foundry space.
4. Coca-Cola
Warren Buffett's love of Coca-Cola (KO 1.05%) products is no secret. The Oracle of Omaha has frequently been photographed sipping on Coke or Diet Coke beverages, and he's also a big fan of the company's stock. The beverage giant stands as Berkshire Hathaway's fourth-largest stock holding, and Buffett has said that he will never sell a share of the company's stock. The famously successful investor cites Coca-Cola's stellar brand strength and dependable business as core components for his belief that the stock is worth holding forever, and there are other things to like about the company as well.
KO Dividend data by YCharts
Thanks to its dependably profitable business, Coca-Cola has been able to build a history of annual dividend increases exceeded by only a handful of other publicly traded companies. The stock currently sports a dividend yield of roughly 2.8% at today's prices, and the beverage leader has increased its dividend each year for six decades straight. When Coca-Cola delivers its next earnings report, it's all but certain that it will announce its 61st consecutive annual payout increase, and investors can count on continued payout growth for many years to come.
5. Berkshire Hathaway
If you want to put the investing talents and wisdom of Buffett to work for your portfolio, investing directly in his company's stock is the best way to do it. Take a look at how Berkshire has outperformed the S&P 500 index in recent decades.
With all the successful investments that the company has made through the years, it's notable that Berkshire has been betting so heavily on one stock in particular lately: its own. Berkshire has now repurchased more than $63 billion worth of its own stock over the last four years -- its biggest investment over the period by far. In addition to signaling that Buffett believes his company is one of the best long-term investments on the market, buying back stock has the effect of boosting earnings per share by retiring the repurchased shares and reducing the total outstanding share count.
Following Buffett's lead on buying Berkshire Hathaway stock is a great way to build positions in a diverse array of businesses, and the company has a stellar management team with a fantastic track record of success.
