Warren Buffett's 60-year career at the helm of Berkshire Hathaway (BRK.A 0.33%) (BRK.B 0.33%) is winding down at the end of this year, but the investing legend's legacy will live forever. Buffett has been a champion of stocks to buy and hold for the long haul, famously saying that "our favorite holding period is forever."
Buffett has been calling the shots for Berkshire Hathaway's $317 billion portfolio for a long time, favoring companies that have strong management, consistent earnings, a competitive moat, and ideally, pay a regular dividend. Some of the names in Berkshire's portfolio have been there for a long time -- and even after Buffett's well-earned retirement, you can emulate the Oracle of Omaha by buying and holding these stocks for the long haul.
Let's look at three of them.
Image source: The Motley Fool.
1. Coca-Cola
Buffett is a well-known fan of Coca-Cola (KO +0.32%), saying he has consumed five cans of the soda every day for years. But he's been equally infatuated with the stock, having first purchased it in 1988. The purchase marked a deliberate shift in Buffett's investment focus, as he began emphasizing quality companies. As he said in 1989, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
NYSE: KO
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In fact, Buffett likes to say that Coca-Cola was his first business venture -- he recalls buying six-packs of the soda in the 1930s and selling them for 5 cents each.
Today, Berkshire Hathaway has 400 million shares of Coca-Cola stock, or nearly 10% of the company. Coca-Cola has rewarded Buffett with consistent returns as it has expanded its product offerings to include lemonade, tea, water, sports drinks, coffee, and alcoholic beverages, in addition to its soft drinks.
Shares of Coca-Cola stock are up 31% in the last three years, but when you factor in the dividend yield of nearly 3%, your returns spike to more than 50%. That's the power of dividend investing.
2. American Express
Under Buffett's leadership, Berkshire Hathaway has shares of Mastercard, Visa, and American Express (AXP 1.06%). But it's the latter that's a clear favorite of the Oracle of Omaha, as Berkshire Hathaway holds a mammoth 22% stake in the credit card company, compared with only 0.4% in both Mastercard and Visa.
NYSE: AXP
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Buffett first started investing in American Express in 1964, following a scandal the previous year involving salad oil inventories that sent the stock plummeting. It was one of Buffett's best early bets: he invested $13 million in the company at around $30 per share and saw his investment jump 124% in just two years.
American Express caters to businesses and a more affluent customer base than Mastercard or Visa, and recently rolled out updated consumer and business platinum cards with annual fees of $895. It's a testament to the power of the American Express brand that its customers are willing to pay that fee.
American Express's three-year return is 216%, but including the quarterly dividend, the return jumps to 240%.
3. Moody's
Moody's (MCO 3.26%) doesn't get a lot of attention, but it's been a longtime Berkshire Hathaway holding under Buffett, who first began investing 25 years ago after the company spun off from Dun & Bradstreet.
NYSE: MCO
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Moody's provides data, intelligence, and analytical tools, but it's best known for its credit ratings, which offer insights into the creditworthiness of companies, governments, and debt securities. Letter-based grades range from Aaa to C and are closely watched by investors and regulators to gauge the health of companies and governments -- and whether or not they can pay their debts.
"We pay Moody's a lot of money to rate us," Buffett said, appearing on Fox Business in 2010 -- a difficult time for the company as it was under heavy criticism for its role in the subprime housing collapse. "I've seen their competitive position, and they operate in a business with very wide profit margins, very high returns on capital, and it's a business that will probably grow over time."
And Buffett was right. Since June 2, 2010, Moody's has delivered a total return (including dividends) of 2,800%, while the S&P 500 has returned only 740% over the same period.
Berkshire Hathaway owns 24.7 million shares of Moody's stock, or nearly 14% of the company.
