Follow the leader. It's a game most of us played as kids. And it just might be a good investing strategy for adults.
When we think of leaders in the world of investing, one name stands out above all others: Warren Buffett. He has managed to achieve staggering cumulative gains over his long career.
His portfolio offers several great ideas for long-term investors today. Here are my picks for the three best Buffett stocks to buy and hold for 10 years (listed in alphabetical order).
1. Amazon
Amazon (AMZN 3.43%) isn't one of Buffett's largest positions. He didn't even make the initial call to add the stock to Berkshire Hathaway's (BRK.A -0.76%) (BRK.B -0.69%) portfolio. However, I predict that Amazon will be one of the legendary investor's biggest winners over the next decade.
Throughout much of Amazon's history, the company's management didn't worry too much about the bottom line. It focused on reinvesting profits to fuel future growth.
Amazon is still investing heavily in growth, but its executives are also now working hard to boost profitability. I expect this focus will continue to pay off.
Artificial intelligence (AI) should provide a massive tailwind for Amazon over the next 10 years and beyond. The company's Amazon Web Services (AWS) platform stands to benefit tremendously as organizations build generative AI apps in the cloud. The company's e-commerce and advertising businesses should also be more profitable as a result of using AI.
I also like that Amazon continually looks at opportunities to expand into new arenas. The company's decision to sell cars online beginning in 2024 is a good example of this. I look for Amazon to move into other new businesses in the years to come.
2. Berkshire Hathaway
You might think I'm cheating a bit, but I couldn't leave Berkshire Hathaway off the list. After all, it's the stock that Buffett is personally invested in the most.
Probably my favorite thing about Berkshire Hathaway is the diversification it provides. The holding company has more than 60 subsidiaries that span multiple industries. It also owns positions in more than 40 other publicly traded companies. Buying shares of Berkshire is almost like investing in an exchange-traded fund (ETF).
Berkshire's core businesses, including its insurance and energy operations, should perform well over the long term. While I'm not a fan of every stock in the conglomerate's investment portfolio, I think most of them should deliver solid returns over the next 10 years.
Perhaps the biggest concern about Berkshire is that Buffett could have health problems, and the stock could suffer, as a result. The good news is that he seems to be in great shape right now. More importantly, though, Berkshire has highly capable executives and investment managers who are already involved in running the company.
3. Mastercard
Amazon and Berkshire Hathaway were relatively easy picks for me as top Buffett stocks to buy and hold for 10 years. The third was tougher, but I ultimately chose Mastercard (MA 0.07%).
Like Buffett, I prioritize business moats when choosing stocks to own for the long haul. Mastercard claims several strong moats, including network effects, economies of scale, and its brand.
I expect that e-commerce will make up a much higher percentage of retail sales in the future. The increased adoption of digital payments is an unstoppable trend. Both should directly benefit Mastercard.
The growth of middle classes in emerging markets in Asia, Africa, and Latin America is another key trend that works in Mastercard's favor. This middle-class expansion is likely to boost e-commerce, digital payments, and credit card use even more.
