News

We provide the latest news
from the world of economics and finance

15 July
3 Top Buffett Stocks to Buy and Hold for the Long Haul
The Motley Fool-Logo

Warren Buffett is one of the world's most closely followed billionaire investors because his investment-driven conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), outperformed the S&P 500 by a wide margin over the past four decades. Therefore, buying some shares of Berkshire Hathaway is still a smart move for investors who want to generate stable long-term gains without doing too much homework.

Even if you don't want to directly invest in Berkshire Hathaway, the conglomerate's investment portfolio is still a great starting point for finding some blue chip winners. I personally believe three of Berkshire Hathaway's tech holdings -- Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Snowflake (NYSE: SNOW) -- will head higher in the future.

Berkshire Hathaway CEO Warren Buffett.

1. Apple

Apple accounts for 44.5% of Berkshire Hathaway's entire portfolio. Buffett started buying Apple in the first quarter of 2016 and now owns 5.1% of the entire tech giant, which is now trading nearly 480% above his average purchase price of $39.60.

From fiscal 2016 to fiscal 2023 (which ended last September), Apple's revenue rose at a compound annual growth rate (CAGR) of 9% as its earnings per share (EPS) grew at a CAGR of 17%. The company bought back nearly 30% of its shares over the past seven years.

Apple achieved that stable growth even as the pandemic, tougher competition in China, and supply-chain constraints disrupted its sales of iPhones. The company still generates more than half of its revenue from the iPhone but has been diversifying its business by expanding its services ecosystem, which now serves more than 1 billion subscribers. It's launched new products like the Vision Pro, and locked in its users with new artificial intelligence (AI)-oriented services.

With $162 billion in cash and marketable securities at the end of its latest quarter, Apple still has plenty of ways to expand its business with fresh investments and acquisitions. From fiscal 2023 to fiscal 2026, analysts expect it to grow its revenue at a steady CAGR of 5% as its EPS increases at a CAGR of 10%. The stock isn't cheap at 31 times forward earnings but could continue rising over the next decade as it diversifies its portfolio with new products and services.

2. Amazon

Berkshire Hathaway's 0.1% stake in Amazon accounts for about 0.5% of its entire portfolio. Buffett started buying Amazon in the first quarter of 2019, and it's risen nearly 140% from his average purchase price of $84.20.

From 2019 to 2023, Amazon's revenue rose at a CAGR of 20% as its EPS grew at a CAGR of 26%. Its e-commerce and cloud infrastructure businesses experienced a major growth spurt during the onset of the pandemic in 2020, but it struggled with tougher year-over-year comparisons as those tailwinds dissipated. Inflation and other macro headwinds further throttled the growth of both of those core businesses in 2022.

But in 2023, Amazon's e-commerce business stabilized as it benefited from faster delivery speeds, the growth of its integrated ads, and its expansion into more overseas markets. Its cloud growth also accelerated again as more companies upgraded their infrastructure to support bigger workloads and AI applications. With $85 billion in cash and marketable securities at the end of its latest quarter, Amazon also has plenty of ways to expand its retail, cloud, and digital-media ecosystems.

From 2023 to 2026, analysts expect the company's revenue and EPS to grow at a CAGR of 11% and 37%, respectively. Its stock isn't cheap at 44 times forward earnings, but its dominance of the e-commerce and cloud markets justifies its higher valuation.

3. Snowflake

Buffett usually avoids hypergrowth tech stocks, but he invested in Snowflake during its initial public offering (IPO) in 2020. Berkshire only holds a 1.8% stake in Snowflake and it's just 0.2% of its entire portfolio, but it's still up about 14% from its IPO price of $120.

Snowflake's cloud-based data warehousing services pull data from a wide range of computing platforms into a centralized location so it can be easily accessed by third-party apps. The market's booming demand for well-organized data, which can be fed to analytics and AI applications, lit a fire under Snowflake's business over the past few years.

Its revenue surged at a CAGR of 80% from fiscal 2020 and fiscal 2024 (which ended this January), but analysts only expect it to grow at a CAGR of 24% from fiscal 2024 to fiscal 2027. That deceleration, which it mainly blamed on the macro headwinds, spooked the bulls. But as Snowflake's sales growth cooled off, it turned profitable on a non-GAAP (generally accepted accounting principles) basis in fiscal 2022 with an EPS of $0.01 -- then grew that figure to $1.08 in fiscal 2024.

Snowflake's stock has declined about 66% from its all-time high of $401.89 on Nov. 16, 2021, but it admittedly doesn't look cheap at 250 times its forward adjusted earnings and 13 times this year's sales. Yet if we take the long-term view, I believe Snowflake could gradually expand and evolve into a much larger cloud software company. If that happens, investors who buy this stock at this slight premium to its IPO price could be well-rewarded over the next few years.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $791,929!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of July 8, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon and Apple. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Snowflake. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.