Warren Buffett is widely regarded as one of the most successful investors of all time. His investment philosophy is based on the principles of the Benjamin Graham school of value investing, which seeks to identify undervalued companies that have strong fundamentals and healthy long-term growth prospects. Buffett also looks for businesses that have durable competitive advantages, or "moats", that protect them from rivals and allow them to generate consistent profits and cash flows.
Buffett's holding company, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%), owns a diversified portfolio of stocks across various sectors and industries. Some of these stocks have been in Buffett's portfolio for decades, reflecting his buy-and-hold strategy and his confidence in their future prospects. While not every stock in Berkshire's broad portfolio stands out as must-own equity for value investors, there are a few that screen as top candidates for long-term investors who want to emulate Buffett's style. Here is a nuts-and-bolts overview of three Warren Buffett stocks worth owning forever.
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Apple: A technological marvel
Apple (AAPL -0.35%) is Buffett's largest holding, accounting for about 46% of Berkshire's portfolio. The tech giant has a loyal customer base, a strong brand, and a dominant position in the smartphone market. Apple also benefits from its growing services segment, which includes the App Store, Apple Music, iCloud, Apple Pay, and more. These services generate recurring revenue streams and high margins for Apple, as well as increase customer loyalty and engagement. Apple has also been investing in new growth areas, such as wearable devices, streaming content, and pay-as-you-go financial services. With its innovative culture, cash-rich balance sheet, and shareholder-friendly policies, Apple is a stock that Buffett and his followers can hold for the long haul without any major concerns.
Coca-Cola: A proven wealth escalator
Coca-Cola (KO) is one of Buffett's oldest and most beloved holdings, dating back to 1988. The beverage giant has a global distribution network, a diversified product portfolio, and a powerful brand that is recognized by billions of consumers. Coca-Cola has been adapting to changing consumer preferences by expanding into new categories, such as coffee, tea, juice, water, energy drinks, and more. Coca-Cola also has a solid track record of returning capital to shareholders through dividends and buybacks. The company has increased its dividend for 61 consecutive years, making it a reliable income generator for long-term investors. In line with this sustainability thesis, the beverage giant also has a reasonable trailing-12-month payout ratio of 74.7%, which suggests that its dividend program is sustainable for the foreseeable future.
American Express: A top financial-services play
American Express (AXP -0.62%) is another long-standing holding of Berkshire Hathaway holding, dating back to the early '90s. The financial-services company has a loyal customer base, a premium brand image, and a network of millions of merchants around the world. American Express earns revenue from both card fees and interest income, giving it a diversified business model. American Express also has a competitive edge in the corporate and affluent segments of the market, where it offers top-notch rewards and benefits to its cardholders. What's more, American Express has been investing in digital initiatives, such as contactless cards and digital wallets, to enhance its customer experience and reach new high-value market segments. With its strong cash flow generation, fiscally conservative capital allocation policies, and healthy growth potential, American Express should continue to deliver outstanding returns for shareholders in the years ahead.
