Warren Buffett is a classic “buy and hold” investor. The most successful investor of all time has held the same positions in some stocks for more than 30 years. And the long-term stocks in Buffett’s portfolio share many of the same characteristics. They tend to be blue-chip companies that are market leaders and well-known brands. They are also stocks that pay dividends to shareholders and remain largely impervious to economic cycles.
In this article, we look at seven long-term stocks investors should consider investing in if they hope to replicate the success of Omaha, Nebraska-based Warren Buffett. Here they are:
- Coca-Cola (NYSE:KO)
- Bank of America (NYSE:BAC)
- Walmart (NYSE:WMT)
- Johnson & Johnson (NYSE:JNJ)
- General Motors (NYSE:GM)
- American Express (NYSE:AXP)
- Apple (NASDAQ:AAPL)
Long-Term Stocks: Coca-Cola (KO)
Nobody’s ever accused it of being flashy, but Coca-Cola is a staple for people around the world, and the sugary beverage has made for an extremely stable investment.
Coca-Cola has long been a favorite investment of Warren Buffett. In fact, KO stock is one of the Oracle of Omaha’s longest held investments. Buffett paid $1.3 billion to buy 400 million shares of Coca-Cola in 1988, and has held that exact same position for nearly 33 years.
Buy-and-hold investors, like Buffett, should appreciate that Coca-Cola is an easy company to understand. After all, they’ve basically made the same drink since 1892. Also, the Atlanta-based company retains a market-leading position in its segment, is well managed and pays a lucrative dividend.
In fact, Coca-Cola is known as a dividend aristocrat and has increased its annual payout to shareholders for 58 consecutive years. In 2019 alone, Buffett’s 400 million shares in Coca-Cola generated $640 million in dividend income for Buffett’s holding company, Berkshire Hathaway. Consider that Buffett has owned his stake in Coca-Cola for more than three decades, and you can see that he has recovered his initial investment and then some.
Investors who want to be like Buffett should take a sizable position in KO stock, hold it for the long term and reap the benefits of the company’s dividend. Coca-Cola stock remains a bargain at its current price of $53.33 a share, 11% below its 52-week high of $60.13 per share.
Bank of America (BAC)
Long-term investors can do worse than to take a position in America’s second-largest bank. Bank of America is the stock Buffett has been most enthusiastic about during the pandemic this year. Since June, Buffett has aggressively increased his stake in BAC stock, buying $1.7 billion worth of the security and increasing his total position in the commercial bank to nearly 12%.
Today, Berkshire Hathaway owns more than one billion Bank of America shares. Buffett obviously saw a bargain in Bank of America’s share price, paying an average of $24.65 per share to increase his holding. Buffett is on the record saying he likes bank stocks because they “earn very high returns on tangible capital,” and have fixed assets.
Investors should like the fact that BAC stock is still relatively cheap at $28.84 a share, 19% below its 52-week high of $35.72 a share. This is one of the best long-term stocks to buy and hold for a while.
Walmart is the one stock on this list of long-term stocks that Warren Buffett doesn’t actually own in his portfolio. However, Walmart is the kind of solid blue-chip company that fits Buffett’s investment style and should appeal to investors who take long positions.
An iconic brand and retailer, Walmart’s focus remains on keeping prices low and selling an ever expanding array of products both online and at its retail outlets.
And Walmart has succeeded in 2020 despite the pandemic. The company’s revenue has grown 9% year-over-year and its e-commerce sales have surged this year as well. WMT stock has also performed well, up 42% from its March low to its current price of $145.60 a share.
Plus, Walmart announced that it is raising its dividend for fiscal 2021 to $2.16 per share, a 2% increase from the $2.12 per share in fiscal year 2020. Surely, Buffett would like that Walmart’s dividend is growing.
Johnson & Johnson (JNJ)
Johnson & Johnson is a multi-faceted investment, as it’s both a pharmaceutical and consumer packaged goods company. It makes some of the most iconic brands in the world, including Band-Aid, Tylenol, Neutrogena and Johnson’s Baby Lotion.
Johnson & Johnson products, such as allergy medication Reactine and heartburn treatment Pepcid are considered necessary by consumers, which helps make JNJ stock immune to economic ups and downs. JNJ was one of the few U.S. companies to raise its guidance in 2020.
The iconic brands and competitive advantage of Johnson & Johnson are a few of the reasons why Warren Buffett holds JNJ stock in his portfolio. Buffett also, no doubt, likes the company’s dividend. Johnson & Johnson pays an annual dividend of $4.04 per share, equal to a dividend yield of 2.68%. And, JNJ’s stock dividend has grown in each of the last 24 years. Johnson & Johnson pays out 46.54% of its earnings as a dividend to shareholders.
Investors looking for consistent dividend income should snap up shares of JNJ stock at its current price of $152.48.
General Motors (GM)
General Motors is the only automotive stock that Buffett owns. The classic U.S. carmaker has many things to recommend it. The biggest U.S. vehicle manufacturer is moving ahead with its five-year $20 billion investment in electric and self-driving vehicles. Analysts like the direction that General Motors is moving in and the fact that the company reported strong third-quarter earnings.
GM stock has been on a tear recently, up 190% from its March low of $14.33 a share. Today, General Motors stock is trading at $41.68 per share. As dealerships reopen, production kicks into high gear and innovative new models come to market, GM stock will continue to rise, which is good news for Buffett, who holds 80 million shares of the company’s stock.
General Motors pays an annual dividend at a yield of 5.23%.
American Express (AXP)
Although it’s been beaten down this year because of the travel restrictions imposed during the Covid-19 pandemic, credit-card provider American Express remains an iconic American business and a solid investment for people with a long-term time horizon.
And despite the work-from-home movement, American Express, which focuses on credit cards for businesses and business travel, remains Buffett’s biggest credit card holding. Buffet continues to hold more than 151 million shares of AXP stock. He first paid $35 a share for American Express stock and today, the shares trade for $119.21 each.
The stock is still 14% below its 52-week high of $138.13, but should rebound as the U.S. economy recovers from the pandemic.
Apple is a stock to retire on. An investor who bought $100 worth of AAPL stock when the company had its initial public offering on December 12, 1980, would today have more than $67,000. Pretty impressive.
Today, the company co-founded by Steve Jobs in a California garage has nearly 1.4 billion active users worldwide, more than 130,000 employees and more than $250 billion in annual revenue. The company and its stock are winners.
And while he has been late to technology stocks, Warren Buffett is now Apple’s largest shareholder, owning nearly 965 million AAPL shares, equal to 5.7% of the company. The iPhone maker has the kind of competitive edge and customer loyalty that Buffett values as a shareholder. In fact, Buffett has said that Apple is “probably the best business I know in the world.” High praise indeed.
After undertaking a four-for-one stock split at the end of August this year, AAPL stock is affordable at just under $129 a share, making it one of the best long-term stocks on this list.
On the date of publication, Joel Baglole held a long position in AAPL.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.