In this article, we discuss the 10 stocks to buy and hold for the long term according to Warren Buffett.
Value investing is an art that has been perfected by Warren Buffett, the Omaha-born investor who heads the Nebraska-based hedge fund named Berkshire Hathaway, over his more than five decades long career in the investing world. The fund, which has investments in 44 companies, manages more than $293 billion in assets. Buffett is presently worth over $103 billion and is the sixth most wealthy individual on the planet, per business news publication Forbes. Buffett has seen his wealth soar by $16 billion so far this year.
Most of this increase is a result of Buffett’s investments that have offered him handsome returns. Some of the top stocks in the Berkshire Hathaway portfolio at the end of the second quarter of 2021 were Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO), among others. Buffett, who was awarded the US Presidential Medal of Freedom in 2011, has delivered a 20% compounded annual gain to investors since 1965.
After facing flak for years regarding his aversion to technology stocks, Buffett – who nonetheless outperformed the wider market with solid investments in value stocks over the period – has started dabbling in the growth sector as well. His returns have, to the surprise of nobody, trumped the stocks picks of seasoned market experts. Nubank, a Brazilian fintech firm backed by Buffett, is planning a $2 billion debut on the market in the coming days. BYD, a Chinese EV maker in which Buffett has held a stake for over a decade, has seen sales triple this year.
There is little doubt that Buffett is one of the, if not the most, successful investors of all time. His success is an exception in the investing world that has otherwise struggled to cope with technology-led changes in society. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here is our list of the 10 stocks to buy and hold for the long term according to Warren Buffett. The stocks mentioned below were picked from the investment portfolio of Berkshire Hathaway at the end of the second quarter of 2021. Only those companies were considered in which the firm’s stake remained unchanged in the second quarter compared to the holdings for the first quarter of 2021. These were then assembled in ascending order according to the present value of the holdings.
The analyst ratings for each company are discussed alongside other details to help readers with their investment choices. The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
Stocks to Buy and Hold for Long Term According to Warren Buffett
10. StoneCo Ltd. (NASDAQ: STNE)
Number of Hedge Fund Holders: 44
StoneCo Ltd. (NASDAQ: STNE) is placed tenth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The firm operates from the Cayman Islands as a financial technology solutions provider. Regulatory filings reveal that Berkshire Hathaway owned more than 10.6 million shares in StoneCo Ltd. (NASDAQ: STNE) at the end of June 2021. The shares are valued at more than $717 million and represent 0.24% of the portfolio.
In March, investment advisory HSBC upgraded StoneCo Ltd. (NASDAQ: STNE) stock to Buy from Hold with a price target of $85. Neha Agarwal, an analyst at the advisory, issued the ratings update regarding the company.
At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in StoneCo Ltd. (NASDAQ: STNE), up from 39 the preceding quarter worth $2.1 billion.
Just like Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO), StoneCo Ltd. (NASDAQ: STNE) is one of the stocks to buy and hold for the long term according to Warren Buffett.
In its Q2 2021 investor letter, JDP Capital Management, an asset management firm, highlighted a few stocks and StoneCo Ltd. (NASDAQ: STNE) was one of them. Here is what the fund said:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
9. T-Mobile US, Inc. (NASDAQ: TMUS)
Number of Hedge Fund Holders: 100
T-Mobile US, Inc. (NASDAQ: TMUS) is ranked ninth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The firm operates from Washington as a communications services provider. Berkshire Hathaway owned more than 5.2 million shares in T-Mobile US, Inc. (NASDAQ: TMUS) at the end of the second quarter of 2021. The shares are worth over $759 million and represent 0.25% of the portfolio.
On July 30, investment advisory Truist reiterated a Buy rating on T-Mobile US, Inc. (NASDAQ: TMUS) stock and raised the price target to $175 from $150, noting that the firm had exceeded expectations with core subscriber growth in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, Greenwich-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ: TMUS) with 7.5 million shares worth more than $1 billion.
In addition to Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO), T-Mobile US, Inc. (NASDAQ: TMUS) is one of the stocks to buy and hold for the long term according to Warren Buffett.
8. STORE Capital Corporation (NYSE: STOR)
Number of Hedge Fund Holders: 13
STORE Capital Corporation (NYSE: STOR) is an Arizona-based real estate investment trust. It is placed eighth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. Latest data shows that Berkshire Hathaway owned more than 24 million shares in STORE Capital Corporation (NYSE: STOR) worth over $842 million at the end of June 2021, representing 0.28% of the portfolio.
On August 24, investment advisory Mizuho kept a Neutral rating on STORE Capital Corporation (NYSE: STOR) stock and raised the price target to $37 from $36, underlying several factors that should benefit the sector in which the firm worked.
At the end of the second quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $899 million in STORE Capital Corporation (NYSE: STOR), the same as in the previous quarter worth $886 million.
Alongside Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO), STORE Capital Corporation (NYSE: STOR) is one of the stocks to buy and hold for the long term according to Warren Buffett.
7. Snowflake Inc. (NYSE: SNOW)
Number of Hedge Fund Holders: 70
Snowflake Inc. (NYSE: SNOW) is a California-based company that owns and runs a cloud data platform. It is ranked seventh on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. Regulatory filings reveal that Berkshire Hathaway owned over 6.1 million shares in Snowflake Inc. (NYSE: SNOW) at the end of the second quarter of 2021. The shares are worth $1.4 billion and represent 0.5% of the portfolio.
On August 20, investment advisory Piper Sandler maintained an Overweight rating on Snowflake Inc. (NYSE: SNOW) stock with a price target of $290, highlighting that a selloff of the stock based on growth concerns was overdone.
At the end of the second quarter of 2021, 70 hedge funds in the database of Insider Monkey held stakes worth $12.5 billion in Snowflake Inc. (NYSE: SNOW), down from 71 in the preceding quarter worth $12.9 billion.
Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO) are some of the stocks to buy and hold for the long term according to Warren Buffett, just like Snowflake Inc. (NYSE: SNOW).
6. Mastercard Incorporated (NYSE: MA)
Number of Hedge Fund Holders: 156
Mastercard Incorporated (NYSE: MA) is placed sixth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The firm operates from New York and markets payments processing services. Securities filings reveal that Berkshire Hathaway owned more than 4.5 million shares in Mastercard Incorporated (NYSE: MA) at the end of June 2021, representing 0.56% of the portfolio. The shares are valued at over $1.6 billion.
On August 17, investment advisory JPMorgan reiterated an Overweight rating on Mastercard Incorporated (NYSE: MA) stock and raised the price target to $430 from $427, noting that the firm was slated for a return to pre-pandemic growth in the second half of 2021.
Out of the hedge funds being tracked by Insider Monkey, Virginia-based investment firm Akre Capital Management is a leading shareholder in Mastercard Incorporated (NYSE: MA) with 5.8 million shares worth more than $2.1 billion.
Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and The Coca-Cola Company (NYSE: KO) are some of the stocks to buy and hold for the long term according to Warren Buffett, along with Mastercard Incorporated (NYSE: MA).
In its Q4 2020 investor letter, Bretton Fund, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE: MA) was one of them. Here is what the fund said:
“While consumers resumed much of their spending by summer, what and how they used their Visas and Mastercards changed. For obvious reasons, people shifted to contactless payments—one of the Covid-era changes we think is permanent—and replaced travel purchases with online shopping and food delivery. Consumers spent more on their debit cards and less on their credit cards; Visa and Mastercard make more per transaction on the latter. They also make more on cross-border transactions that come mostly from international travel, which ground to a halt early in the pandemic. Visa’s and Mastercard’s earnings per share fell by 7% and 16%, respectively, compared to their usual mid-teens growth. We’re not too worried, and we think they’ll catch up nicely in the post-vaccine world. Visa’s stock returned 17.1% and Mastercard’s 20.2%.”
5. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ: AMZN) is ranked fifth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The company operates from Washington as a technology firm. According to the latest filings, Berkshire Hathaway owned 533,300 shares in Amazon.com, Inc. (NASDAQ: AMZN) at the end of the second quarter of 2021. The shares are worth $1.8 billion and represent 0.62% of the portfolio.
On July 30, investment advisory JPMorgan maintained an Overweight rating on Amazon.com, Inc. (NASDAQ: AMZN) stock but lowered the price target to $4,100 from $4,600, noting the earnings miss by the firm in the second quarter and lower-than-expected guidance numbers.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ: AMZN) with 3.8 million shares worth more than $13.1 billion.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ: AMZN) was one of them. Here is what the fund said:
“Amazon (AMZN): We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment: 1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon, we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is in a much different place than when we initially invested. Back in 2014, investors were starting to question whether Amazon’s promise of future earnings potential would actually come to fruition.
Operating income had declined from ~$1.4BN in 2010, to ~$676M in 2012, to just ~$178M by the end of 2014. Expenses were outpacing revenue growth, and investors were questioning whether Amazon’s expenses were truly “investments” as they claimed, or whether it was a structural necessity of the business and thus would never flow to investor’s bottom line.
The critical question was ‘what portion of expenses are truly growth investments vs. structural expenses, and as a result, will Amazon ever be capable of generating significant profits?’
Our analysis indicated that these expenditures truly were the former, and led to the belief that the business’ structural margins would inevitably increase over time. This was our differentiated insight / investment edge.
Fast-forward to today, and our thesis proved correct with operating margins having increased from ~0.2% to ~6%. However due to this success and proving this facet out to investors, Amazon investors have much higher confidence and a better understanding of the company today. I’m not sure we have the same level of differentiated insights, as we did back then.
In addition, I believe the departure of Jeff Bezos and his long-time lieutenants signal a regime change. Perhaps it’s now “Day 1.5” instead of the Day 1 mentality that made Amazon so successful (LINK)… The departures within the past couple years include:
- Jeff Bezos – Founder, CEO, Visionary. Started Amazon in 1994.
- Jeff Blackburn – Joined Amazon in 1998. Oversaw Amazon Marketplace, Advertising,
Amazon Studios, Prime Video, Prime Music, M&A.
- Jeff Wilke – Joined Amazon in 1999. Oversaw Amazon Consumer (ecommerce)
business.
- Steve Kessel – Joined Amazon in 1999. Oversaw Physical Stores, Kindle, and Whole
Foods.
Blackburn, Wilke, and Kessel have each arguably created hundreds of billions of shareholder value. On top of this, Bezos is the visionary and culture-setter behind Amazon. When he and his long-time lieutenants take their hands off the wheel, it is probably time for us to as well.
We sold our remaining shares at an average price of ~$3,240. Based on our initial investment, we made a ~10x return in a little over six years, for a ~45% IRR7. We reinvested the proceeds into our existing portfolio, taking advantage of the prices offered by this latest market draw-down.”
4. Visa Inc. (NYSE: V)
Number of Hedge Fund Holders: 162
Visa Inc. (NYSE: V) is a California-based payments technology company. It is placed fourth on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. Latest data reveals that Berkshire Hathaway owned close to 10 million shares in Visa Inc. (NYSE: V) at the end of June 2021. The shares are valued at more than $2.3 billion and represent 0.79% of the portfolio.
On August 17, investment advisory JPMorgan reiterated an Overweight rating on Visa Inc. (NYSE: V) stock and raised the price target to $267 from $249, underlining that the modern players in the payments sector were outperforming expectations.
At the end of the second quarter of 2021, 162 hedge funds in the database of Insider Monkey held stakes worth $27 billion in Visa Inc. (NYSE: V), down from 164 in the preceding quarter worth $26 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE: V) was one of them. Here is what the fund said:
“To make room for these new names with more attractive outlooks related to the reopening, we sold out of companies where the thesis is not playing out at the pace we expected including Visa.”
3. VeriSign, Inc. (NASDAQ: VRSN)
Number of Hedge Fund Holders: 41
VeriSign, Inc. (NASDAQ: VRSN) is a Virginia-based firm that provides internet-related services. It is ranked third on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. Securities filings show that Berkshire Hathaway owned over 12.8 million shares in VeriSign, Inc. (NASDAQ: VRSN) at the end of June 2021. The shares are valued at over $2.9 billion and represent 0.99% of the portfolio.
In April, investment advisory Citi kept a Neutral rating on VeriSign, Inc. (NASDAQ: VRSN) stock and raised the price target to $245 from $235. Nicholas Jones, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $6.1 billion in VeriSign, Inc. (NASDAQ: VRSN), down from 42 in the preceding quarter worth $5.6 billion.
2. The Bank of New York Mellon Corporation (NYSE: BK)
Number of Hedge Fund Holders: 52
The Bank of New York Mellon Corporation (NYSE: BK) is placed second on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The company provides financial services and is based in New York. Regulatory filings reveal that Berkshire Hathaway owned over 72 million shares in The Bank of New York Mellon Corporation (NYSE: BK) worth more than $3.7 billion at the end of the second quarter of 2021, representing 1.26% of the portfolio.
On July 20, investment advisory Argus upgraded The Bank of New York Mellon Corporation (NYSE: BK) stock to Buy from Hold with a price target of $55, citing the second quarter earnings beat of the firm in the ratings update.
At the end of the second quarter of 2021, 52 hedge funds in the database of Insider Monkey held stakes worth $4.9 billion in The Bank of New York Mellon Corporation (NYSE: BK), up from 49 the preceding quarter worth $4.7 billion.
1. Charter Communications, Inc. (NASDAQ: CHTR)
Number of Hedge Fund Holders: 75
Charter Communications, Inc. (NASDAQ: CHTR) is ranked first on our list of 10 stocks to buy and hold for the long term according to Warren Buffett. The company provides communication and internet services. It is headquartered in Connecticut. According to the latest filings, Berkshire Hathaway owned over 5.2 million shares in Charter Communications, Inc. (NASDAQ: CHTR) worth $3.7 billion at the end of June 2021, representing 1.28% of the portfolio.
On August 24, investment advisory Pivotal Research kept a Buy rating on Charter Communications, Inc. (NASDAQ: CHTR) stock and raised the price target to $1,000 from $820, backing the company to deliver solid results in the second half of the year.
At the end of the second quarter of 2021, 75 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Charter Communications, Inc. (NASDAQ: CHTR), up from 74 the preceding quarter worth $16 billion.
You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.
Follow Insider Monkey on Twitter
Suggested Articles:
- 15 Most Valuable Alcohol Companies
- Chuck Akre’s Top 10 Stock Holdings
- Billionaire Julian Robertson’s Top 10 Stocks
Disclosure. None. 10 Stocks to Buy and Hold for Long Term According to Warren Buffett is originally published on Insider Monkey.
