Warren Buffett has a strong aversion to parting with quality stocks.
Many investors closely monitor Warren Buffett’s actions as the billion-dollar investor has consistently demonstrated his skill in selecting stocks. He targets robust companies that are traded at sensible prices, intending to hold onto them for the long term—Buffett famously stated that his preferred holding period is “forever.” A prime illustration of this is Coca-Cola, a stock he acquired in the late 1980s and still possesses today.
In his role as chairman of Berkshire Hathaway, Buffett has validated this strategy, achieving a compounded annual return of nearly 20% over 59 years, while the S&P 500 has only seen about a 10% compound annual growth during the same timeframe.
With this in mind, let’s explore two of Buffett’s stocks that could be great additions to your portfolio for the long haul…
1. Amazon
Buffett’s relationship with Amazon (AMZN -0.74%) started off shakily. Initially, he neglected to buy Amazon early on and later confessed he missed the company’s potential. However, a member of Buffett’s investment team eventually saw the opportunity and included Amazon in the Berkshire Hathaway portfolio in 2019.
Since that investment, Amazon’s stock has risen over 100%, and there are still significant growth prospects ahead. While its e-commerce platform is well-known, Amazon is also a dominant player in cloud computing, with Amazon Web Services (AWS) being the leading cloud entity and its primary source of profit.
Looking forward, Amazon is strategically poised to capitalize on what might become a trillion-dollar market in artificial intelligence (AI). The company is leveraging AI to improve efficiency in its e-commerce operations, while AWS provides AI-related products and services. AWS has already shown remarkable growth, reaching a $123 billion annual revenue run rate thanks to AI advancements. Over time, Amazon’s integration of AI should enhance operational efficiency and foster earnings growth.
2. American Express
American Express (AXP -1.15%) has been a long-standing holding for Buffett, who likely appreciates the company’s significant competitive advantage. American Express serves a wealthy clientele globally, offering various perks that have led to steady revenue and user growth—a model that would be hard for competitors to replicate.
The company has consistently posted earnings growth and recently gained traction among younger consumers. In the latest quarter, 63% of new global consumer accounts came from millennials and Gen Z. During this period, revenue rose by 9% to a record $17.9 billion, while cardholder spending hit an all-time high. American Express reported a 17% increase in adjusted earnings per share and reaffirmed its revenue and earnings outlook for the full year.
What I find particularly appealing about American Express is its resilience during economic downturns; its affluent cardholders are less affected by economic fluctuations and tend to maintain their spending habits. Currently, American Express trades at 21 times forward earnings estimates, an increase from below 15 a year ago, but still represents a reasonable entry point for long-term investors. Buffett emphasized in his 2023 letter to shareholders that “the lesson from Coke and AmEx? When you find a truly wonderful business, stick with it.”
American Express is an advertising partner of Motley Fool Money. Adria Cimino holds positions in both Amazon and American Express. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool has a disclosure policy.
