Few investors are better known than Warren Buffett, who is widely regarded as the greatest stock picker of all time. One of Buffett's signature qualities is his long-term approach to investing. He has been quoted as saying that his favorite holding period is forever. It's not surprising then that his conglomerate, Berkshire Hathaway, has an investment portfolio full of stocks worth holding on to for good.
Let's discuss two of them: Johnson & Johnson (JNJ -0.46%) and Apple (AAPL -0.35%). Whether a bull market is on the way or already present, here's why investors can safely park both stocks in their portfolios and forget about them through the next market run and well beyond.
1. Johnson & Johnson
Johnson & Johnson doesn't feature prominently among Buffett's holdings -- that is, it isn't among the largest. Still, the drugmaker found its way there for a reason. J&J is the epitome of longevity in business. While few companies last over a couple of decades, Johnson & Johnson's rich history spans more than 100 years.
There are at least two factors that explain Johnson & Johnson's durability. First, as a healthcare company, it markets products that are always in demand, such as drugs and medical devices. Second, Johnson & Johnson has successfully created an internal culture of innovation. The company spends billions of dollars every year on research and development, typically leading to it constantly developing newer and better products.
These two factors should continue to drive Johnson & Johnson shares higher. The need for the products it sells won't subside anytime soon. It will only increase due to the world's aging population. On the other hand, Johnson & Johnson should remain committed to innovation. The dozens of products in its pipeline are a great sign of that.
Within its medtech segment, the company is looking to profit from the exciting robotic-assisted surgery (RAS) market with its robot device, Ottava. RAS devices allow physicians to perform minimally invasive surgeries with advantages such as less cutting of the skin, less bleeding and scarring, faster recovery times, and shorter hospital stays. Intuitive Surgical currently dominates this field, but there is an important long-term opportunity for Johnson & Johnson to exploit.
And then there is the company's dividend, which it has raised for the last 61 years straight. That makes Johnson & Johnson a Dividend King. The company is unlikely to risk ending that impressive streak, so expect more payout raises regularly.
Johnson & Johnson isn't without its risks. The company's recent legal challenges are particularly noteworthy. But in my view, they do little to hinder its long-term prospects. Johnson & Johnson is an excellent stock to buy and hold through bull and bear markets and should continue to deliver steady financial results.
2. Apple
Apple is probably Buffett's favorite stock, perhaps other than Berkshire Hathaway itself. While the company doesn't offer necessary goods, it has built a powerful reputation, brand name, and ecosystem. That's why people continue to buy Apple's costly gadgets even when the economy isn't doing so well. The company hasn't always delivered blowout results over the past two years, with its revenue even dropping slightly in its latest quarterly update.
But given that hardly anyone truly needs a new iPhone, not to mention the fact that there are plenty of cheaper alternatives, Apple's performance amid all the economic problems consumers have faced is impressive. That's one of the reasons why it is an outstanding stock to buy and hold.
Here is another: Apple's installed base of more than 2 billion devices. And it is hard to leave once you're plugged into the company's network. That's because Apple offers a range of services that are easy to access on its devices but not so easy to use once a customer jumps ship. Something as seemingly simple as transferring data and pictures from an iPhone to an Android device can be a headache.
In other words, Apple benefits from high switching costs. With the vast number of devices in its ecosystem, the company will continue expanding its high-margin services segment to squeeze more money out of its massive user base. The company has made solid headway into the fintech business, for instance. Elsewhere, it is also delving into health, notably by trying to integrate glucose monitoring into the Apple Watch.
This would likely represent a relatively small opportunity (in terms of revenue potential) for Apple, but the important point is that the company is working on more and more ways to serve its user base better. The company should remain an innovator that records excellent financial results for a long time, so investors can safely buy its stock and hold on to it for good.
