In this article, we discuss the 10 stocks to buy and hold for the long term according to Warren Buffett. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks to Buy and Hold for 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%.”
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Disclosure. None. 10 Stocks to Buy and Hold for Long Term According to Warren Buffett is originally published on Insider Monkey.
