In this piece, we will take a look at the best forever stocks to buy now.
The macroeconomic landscape in the United States, which has been a focal point in headlines and the stock market for over two years, is undergoing a rapid transformation. Just a year ago, investors’ primary concerns revolved around interest rates and heightened inflation. However, the Russian invasion of Ukraine and the subsequent commodity shock, along with pandemic-induced stimulatory spending, compelled the Federal Reserve to swiftly increase interest rates. As the market enters the second half of 2023, the Federal Reserve’s decisive approach to interest rate hikes is finally bringing about some clarity regarding an economic cooldown.
Earlier this June, Fed officials made predictions indicating their intention to raise interest rates twice more within the year, assuming these adjustments would be made in quarter-point increments. However, that does not mean that the Fed must hurt the labor market to achieve policymakers’ goals. In fact, Fed Chair Powell has acknowledged that wages are not necessarily the primary factor driving current inflation. He has noted that wages and inflation often exhibit a correlated relationship, but determining which one is causing the other is challenging to determine.
As the July 7 payrolls report approached, traders were preparing for a potentially impactful event. Surprisingly robust data released by the ADP Research Institute a day prior had convinced the market that job growth in the US was still “too strong” from the perspective of central bankers cautious about inflation. According to the report, US employers added 209,000 jobs in June, falling short of Wall Street expectations. This led to concerns that the Federal Reserve might implement tighter monetary policy. However, the outcome presented a more nuanced view of the labor market, indicating a moderate slowdown that aligns with the Fed’s objectives, albeit at a slower pace than anticipated by some. Investors widely expect the Fed to raise interest rates at their July meeting, and the strength of the labor market could help to shape the outlook after that.
These are all developments affecting the market in the short-term. If you are a long-term investor who is looking for forever stocks to buy as we do in our monthly newsletter, you hope that the stock market declines by at least 20% to buy your favorite stocks at a discount. At the end of September 2022, the market provided such an opportunity. We don’t think we are going to get another opportunity in the near future and this may be relatively the best time to buy.
As the market closed the first half of this year with a positive boost from a reassuring inflation report, the notion of acquiring the best “forever stocks” might appear overly cautious. With market sentiment strong and supported by seemingly justifiable factors, investors may lean towards riskier securities with higher potential returns. However, it’s important to acknowledge that long-term stock investments hold their own value and significance. With these details in mind, let’s take a look at some potential forever stocks, out of which the top picks include the likes of Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and Apple Inc. (NASDAQ:AAPL), among others listed below.
Our Methodology
“Our favorite holding period is forever.” When it comes to long-term investments, who better to imitate than Wall Street’s legendary value investor, Warren Buffett. In order to compile our selection of the best forever stocks, we began by analyzing Buffett’s stock portfolio and chose to highlight the stock holdings that have remained within his portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock based on Insider Monkey’s survey of 943 funds during the first quarter of this year. Using this information, the stocks were ranked.
To be clear the following 13 stocks are the best forever stocks to buy according to billionaire investor and secret hedge fund manager Warren Buffett. We have our own list of favorite forever stocks that we share in our premium newsletter. You should do your own research and decide any of the following stocks fit your definition of forever stocks:
13. DaVita Inc. (NYSE:DVA)
Number of Hedge Fund Holders: 32
Headquartered in Denver, Colorado, DaVita Inc. (NYSE:DVA) is a prominent healthcare company specializing in kidney care services. With a significant presence, it ranks among the largest providers of dialysis services in the United States. The company’s primary focus lies in treating individuals with end-stage renal disease (ESRD) and chronic kidney failure.
Lisa Bedell Clive at Bernstein issued an update on May 15, raising the price target on DaVita Inc. from $88 to $100. This adjustment came in response to the company’s improved 2023 guidance, which was announced on May 9.
After digging through 943 hedge funds for their March quarter of 2023 investments, Insider Monkey discovered that 32 had bought DaVita Inc.’s shares. The firm’s second largest investor after Warren Buffett is Jeffrey Gates’ Gates Capital Management, owning one million shares that are worth $84 million.
Here is what Moon Capital Management said about DaVita Inc. in its Q4 2022 investor letter:
“During the fourth quarter, we purchased shares in DaVita Inc. (NYSE:DVA), a dialysis center operator. For those unfamiliar, kidney dialysis involves the critical removal of toxins, fluids and salts from the blood by artificial means. Roughly 500,000 patients receive kidney dialysis in the U.S., which requires a 3.5-hour treatment three times a week. The only alternatives to the treatments are a kidney transplant or potential fatality. Given the critical nature of its services, demand has little correlation with the overall economy, resulting in a highly recession resistant business.
The U.S. dialysis industry is highly concentrated, with two companies (DaVita and its competitor Fresenius) controlling a combined 80% of the $25 billion market. The dominance of this duopoly provides massive scale advantages, making it incredibly difficult for new entrants to gain profitable market share.
In the past, DaVita’s valuation has been penalized (we view unfairly) because the company generates a significant portion of its operating income from a small percentage of its patients. Of DaVita’s 200,000 patients, approximately 90% qualify for Medicare (or Medicaid), with the remaining 10% covered by a commercial insurance provider. While commercial insurers pay an average of $1,000 per treatment, the federal government’s pay rate for Medicare and Medicaid is only $275 – which is actually less than what it costs DVA to provide the treatment…”(Click here to read the full text)
DaVita Inc. ranks among the likes of Visa Inc., Mastercard Incorporated, and Apple Inc. as a decent stock for long-term investments.
12. The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Fund Holders: 34
The Kraft Heinz Company (NASDAQ:KHC), commonly known as Kraft Heinz, is an American multinational food company formed by the merger of Kraft Foods and H.J. Heinz Company co-headquartered in Chicago and Pittsburgh. The company is involved in making and selling a wide variety of products, including cheese, meals, meats, dairy products, spices, coffee, and others.
The Kraft Heinz Company released its Q1 financial results on May 3, revealing a non-GAAP EPS of $0.68 and revenue of $6.49 billion. These figures exceeded Wall Street estimates by $0.08 and $100 million, respectively. Additionally, the company anticipates a 4% to 6% growth in organic net sales for 2023, as compared to the previous year.
Out of the 943 hedge funds included in Insider Monkey’s Q1 2023 database, 34 of them held a stake in The Kraft Heinz Company. First Eagle Investment Management, managed by Jean-Marie Eveillard, emerged as the largest hedge fund investor, with a stake worth $256 million, equivalent to 6.6 million shares. However, the largest overall investor in Kraft Heinz is Warren Buffett, with a massive investment of $12 billion.
11. VeriSign, Inc. (NASDAQ:VRSN)
Number of Hedge Fund Holders: 37
Verisign Inc. (NASDAQ:VRSN) is an American company based in Reston, Virginia, United States, that operates a diverse array of network infrastructure that allows firms to maintain their servers, access domain names, and run security applications. The company ended the first quarter of 2023 with 174.8 million domains in the .com/.net base, which was 1 million more than it ended in the same quarter a year ago.
By the end of this year’s first quarter, 37 of the 943 hedge funds part of Insider Monkey’s database had held a stake in the company. Following Warren Buffett, Jim Simons’ Renaissance Technologies is VeriSign, Inc.’s largest shareholder, which owns 3.1 million shares that are worth $672 million.
10. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 43
The Kroger Co. (NYSE:KR), or simply Kroger, is an American retail company that operates supermarkets and multi-department stores throughout the United States. With more than 2,700 supermarkets and multi-department stores spread across 35 states in the United States, The Kroger Co. ranks as one of the largest food retailers in the world.
Earlier this June, UBS lowered the price target on The Kroger Co. to $48 from $51 and kept a Neutral rating on the shares. According to the analysts’, sentiment on Kroger remains mixed despite a “strong” performance in Q1 as its FY23 outlook remains uncertain. The firm also states that the tone will likely remain mixed until the market gains more confidence in Kroger’s intermediate-term outlook and that this will likely leave the stock range-bound for “the foreseeable future.”
Insider Monkey took a look at 943 hedge funds for their first quarter of 2023 investments and found out that 43 had owned The Kroger Co.’s shares. Warren Buffett’s Berkshire Hathaway owns a $2.5 billion stake in the company.
Oakmark Funds, advised by Harris Associates, made the following comment about The Kroger Co. in its Q1 2023 investor letter:
“Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and mortar grocery businesses. However, we believe Kroger’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption.”
9. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 51
Moody’s Corporation, commonly known as Moody’s, is an American business and financial services company. It serves as the parent company for Moody’s Investors Service (MIS), an American credit rating agency, and Moody’s Analytics (MA), a provider of financial analysis software and services based in the United States.
Jeffrey Silber, an analyst at BMO Capital, restated an Outperform rating for Moody’s Corporation stock on May 17, while increasing the target price from $355 to $360. Silber holds the belief that Moody’s Corporation has the potential for a substantial upside of over 16%, considering the closing stock price as of May 18.
By the end of Q1 2023, 51 of the 943 hedge funds profiled by Insider Monkey had bought a stake in Moody’s Corporation. A major hedge fund investor is Chris Hohn’s TCI Fund Management with a $3.17 billion stake.
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
Established in 1892, The Coca-Cola Company (NYSE: KO) is a prominent American multinational corporation renowned for its production of the iconic Coca-Cola beverage. In addition to its flagship product, the company is involved in the manufacturing, sales, and marketing of a diverse array of non-alcoholic beverage concentrates, syrups, and even some alcoholic beverages within the beverage industry. As one of the largest beverage corporations globally, The Coca-Cola Company holds a significant position among the long-term investments of renowned value investor Warren Buffett. Buffett, who has maintained a stake in the company since 2010, has famously expressed his unwavering commitment to retain his shares in the company.
On June 6, HSBC analyst Carlos Laboy lowered the price target on The Coca-Cola Company to $74 from $77 and maintained a Buy rating on the shares. The analyst views Coca-Cola as a much better defensive stock in inflationary times than in the past. However, his near term concern for beverage giant remains the ongoing tax litigation, which it says could cost the company up to 14 billion in payments to the Internal Revenue Service (IRS).
According to Insider Monkey’s first quarter database, 61 hedge funds were bullish on The Coca-Cola Company, compared to 58 funds in the preceding quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with 400 million shares worth $24.8 billion.
Rowan Street Capital mentioned The Coca-Cola Company in its Q4 2022 investor letter. Here is what the firm has to say:
“Let’s take The Coca-Cola Company for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next year’s forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”
7. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 73
General Motors, formally the General Motors Company (NYSE:GM), is an American multinational automotive manufacturing company headquartered in Detroit, Michigan, United States.
During the initial quarter of 2023, the company experienced an impressive 11.1% growth in revenue compared to the previous year, reaching nearly $40 billion. Additionally, the automotive operating cash flow for the quarter rose to $2.3 billion, showcasing a significant increase from $1.6 billion in the same period of the previous year.
Adam Jonas, an analyst at Morgan Stanley, raised General Motors Company from an Equal Weight rating to an Overweight rating on May 1. Additionally, the analyst increased the price target on the stock from $35 to $38. Recognizing General Motors Company as one of the leading companies in the auto sector, Jones included it in his list of the “top 5” automotive companies.
According to Insider Monkey’s Q1 2023 database, 73 hedge funds disclosed long positions in General Motors Company, worth roughly $4 billion. Of these, investment firm Harris Associates holds a significant position as a shareholder.
6. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 75
The Procter & Gamble Company is an American multinational consumer goods corporation headquartered in Cincinnati, Ohio, founded in 1837 by William Procter and James Gamble. The company provides branded consumer packaged goods worldwide, operating through Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care segments.
On April 11, the company announced a quarterly dividend of $0.9407 per share, marking a 3% increase. With this raise, the company extended its impressive streak of dividend growth to 67 years, solidifying its position as not only one of the top dividend aristocrat stocks on our list, but also one of the best forever stock.
According to Insider Monkey’s first quarter database, 75 hedge funds were bullish on The Procter & Gamble Company, compared to 74 funds in the preceding quarter. Ray Dalio’s Bridgewater Associates is the largest stakeholder of the company, with 4.94 million shares valued at $735.2 million.
Rowan Street Capital made the following comment about The Procter & Gamble Company in its Q4 2022 investor letter:
“Let’s look at The Procter & Gamble Company. Dividend yield is 2.4%. Earnings are forecasted to grow at 5.9%, and its current earnings multiple is at 25x. Now, let’s say over the next 3-5 years the market loses interest in the “safe”, mature companies that grow at anemic rates and gets an appetite for growth again. It’s very unlikely that Mr. Market will be paying 25x for 5.9% earnings growth. Let’s assume that multiple declines to the market average of 18x — that would be ~6.9% drag per year on the total expected return over next 3-5 years. If we get 2.4% (dividend) + 5.9% (earnings growth) – 6.9% (decrease in earnings multiple) = 1.4% (annual return we can expect on average from this stock).”
Much like Visa Inc., Mastercard Incorporated, and Apple Inc., The Procter & Gamble Company is a top ‘forever’ stock finding favor with hedge funds.
5. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 77
American Express Company (NYSE: AXP) is a renowned American multinational corporation in the financial services sector, primarily focusing on payment cards. With its headquarters situated in New York City, American Express Company offers a robust platform that enables users to engage in digital payments, facilitating seamless and secure transactions. The company holds a position among the world’s most valuable enterprises and is listed as one of the 30 components of the Dow Jones Industrial Average.
As a premium company, American Express Company has an impressive track record of paying regular dividends to its shareholders for the past 30 years. On May 3, the company announced a quarterly dividend of $0.60 per share, maintaining the same dividend amount as the previous quarter.
Based on Insider Monkey’s database of 943 hedge funds, it was revealed that 77 of them invested in American Express Company during the first quarter of 2023. Warren Buffett’s Berkshire Hathaway holds a substantial stake in the company, valued at $25 billion, which corresponds to 151 million shares as of Q1 2023. American Express is a long-standing fixture in Warren Buffett’s portfolio, with Buffett affirming that the stock will remain a permanent part of his investment holdings. The hedge fund initiated its position in American Express Company in Q4 2010, acquiring shares at an average quarterly price of $42.19.
ClearBridge Large Cap Value Strategy made the following comment about American Express Company in its first quarter 2023 investor letter:
” Other financial holdings were among the top contributors, such as American Express Company (NYSE:AXP), whose business is less sensitive to changes in the yield curve than most financials, and Progressive, which has minimal interest rate mismatch exposure.”
4. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 84
Johnson & Johnson is an American multinational corporation founded in 1886 that is known for developing medical devices, pharmaceuticals, and consumer packaged goods. The pharmaceutical company maintains a 62-year track record of consistent dividend growth. It pays a quarterly dividend of $1.19 per share and has a dividend yield of 2.99%, as of July 8.
The number of hedge funds tracked by Insider Monkey owning stakes in Johnson & Johnson grew to 86 in Q1 2023, from 84 in the previous quarter. These stakes have a consolidated value of over $4.5 billion. Johnson & Johnson’s largest hedge fund investor is Ken Fisher’s Fisher Asset Management with a $967 million stake.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Hedge funds and Wall Street analysts widely concur that Apple Inc. stands as an exceptional long-term investment option. This consensus is rooted in several factors, including Apple’s strong product lineup, substantial growth in services and software, and the company’s unwavering dedication to innovation and long-term strategies. The company has been favored by billionaire Warren Buffett for many years.
On May 4, Apple Inc. disclosed its financial results for FQ2, outperforming Wall Street’s projections. The company achieved a GAAP EPS of $1.52 and generated revenue amounting to $94.84 billion, surpassing estimates by $0.09 and $2 billion, respectively.
Our hedge fund data for the first quarter shows 131 hedge funds long Apple Inc.. Their total stake value was $165 billion. Holding 915.6 million shares in the company, Warren Buffett’s Berkshire Hathaway was the largest stakeholder in Apple Inc. at the end of the first quarter.
Silver Ring Value Partners made the following comment about Apple Inc. in its first-quarter 2023 investor letter:
“Exited the Apple Inc. (NASDAQ:AAPL) put options position, as I came to the conclusion that I was wrong about the degree to which the stock is overvalued. While I still believe it’s optimistically priced, the fundamentals over the last few years made me believe that my initial decision to buy the put options was wrong.”
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 136
Mastercard Incorporated is the second-largest payment-processing corporation worldwide. Headquartered in Purchase, New York, it offers a range of financial services, including credit and debit cards, as well as data analytics, settlements, payment deferrals, and other services.
On April 27th, Mastercard Incorporated announced its financial results for Q1, exceeding the expectations of Wall Street. The company achieved a non-GAAP EPS of $2.80 and generated a revenue of $5.7 billion, surpassing estimates by $0.09 and $60 million, respectively.
138 of the 943 hedge funds part of Insider Monkey’s database had bought Mastercard Incorporated’s shares in Q1 2023. Out of these, Charles Akre’s Akre Capital Management is the largest shareholder since it owns 5.8 million shares that are worth $2.1 billion.
Manole Capital Management made the following comment about Mastercard Incorporated in its second quarter 2023 investor letter:
“We like to start out all of our discussions by telling investors who we are. We are FINTECH investors, and we define Fintech as “anything utilizing technology to improve an established process.” We realize that half of Fintech is financial, but we don’t invest in traditional, credit sensitive banks. Having managed money during the Financial Crisis, we learned firsthand how certain opaque and balance sheet intensive financials could go bankrupt or insolvent.
We prefer transaction-based businesses, generating recurring revenue, with sustainable margins, and significant cash flow. From our perspective, the perfect example of a FINTECH business is the secularly growing payments industry. Names like Visa or Mastercard Incorporated (NYSE:MA), that generate revenue and profit per swipe or transaction, without the underlying credit sensitivity or risk associated with that underlying line of credit.”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 173
Headquartered in San Francisco, California, Visa Inc. is a prominent American multinational financial services corporation. The company specializes in facilitating electronic funds transfers on a global scale, predominantly utilizing Visa-branded credit cards, debit cards, and prepaid cards. As of July 8, Visa Inc., a global leader in electronic payments, offers a quarterly dividend of $0.45 per share, resulting in a dividend yield of 0.76%. Recognized as one of the world’s most valuable companies, Visa Inc. has been a longstanding investment in Warren Buffett’s portfolio.
At the end of March 31, 173 hedge funds tracked by Insider Monkey held stakes in Visa Inc., compared with 177 in the previous quarter. Collectively, these stakes are worth over $26 billion. Chris Hohn’s TCI Fund Management holds the largest stake in the company, with shares valued at approximately $4.34 billion.
Manole Capital Management made the following comment about Visa Inc. in its second quarter 2023 investor letter:
“We like to start out all of our discussions by telling investors who we are. We are FINTECH investors, and we define Fintech as “anything utilizing technology to improve an established process.” We realize that half of Fintech is financial, but we don’t invest in traditional, credit sensitive banks. Having managed money during the Financial Crisis, we learned firsthand how certain opaque and balance sheet intensive financials could go bankrupt or insolvent.
We prefer transaction-based businesses, generating recurring revenue, with sustainable margins, and significant cash flow. From our perspective, the perfect example of a FINTECH business is the secularly growing payments industry. Names like Visa Inc. (NYSE:V) or Mastercard, that generate revenue and profit per swipe or transaction, without the underlying credit sensitivity or risk associated with that underlying line of credit.”
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