In this piece, we will take a look at the 12 best long-term stocks to buy according to Warren Buffett.
Warren Buffett, the most famous investor on Wall Street, needs no introduction, having generated billions of dollars for himself and investors for decades. Throughout his investment career that began in 1965, the ‘Oracle of Omaha’ has averaged annual returns of 19.8%, trumping a gain of 9.9% for the S&P 500 over the same period.
The market-beating performance has propelled Buffett to the top of the charts as one of Wall Street’s most revered and followed investors. His investment portfolio is always tracked as investors scan for potential market opportunities.
READ ALSO: 10 Best Debt-Free Penny Stocks to Buy Now and 10 Best Counter Cyclical and Defensive Stocks to Invest In.
Likewise, Buffett is one of the most successful investors in Wall Street’s history, having accumulated a fortune of $138 billion. His total assets might have been significantly higher if he hadn’t donated large sums to different charitable causes.
Market participants have always applauded his disciplined approach, which entails a long-term perspective. His investment firm has become the latest company to cross the $1 trillion mark on market cap, underlining Buffett’s impressive stock-picking skills. According to Cathy Seifert, Berkshire analyst at CFRA Research, the $1 trillion milestone is a testament to Buffet’s investment firm’s financial strength and franchise value.
Buffett’s investment strategy has remained constant throughout his career, focusing on the concept of value investing. The strategy focuses on identifying companies that are undervalued but have the potential to increase in value over time. Buffett seeks out companies with a lasting edge over competitors, like a well-established brand, high barriers to entry, and a large and loyal customer base, and he buys into them at a price that ensures a safety margin.
Likewise, the billionaire investor is well-known for his cautious stance on investing in high-risk, high-reward sectors like technology. Instead, he prefers to invest in more stable sectors such as retail, insurance, and finance. He is recognized for his commitment to long-term investments, holding onto companies for extended periods, and steering clear of frequent trading. This strategy enables him to benefit from the compound interest effect and allows the companies he invests in to mature and produce significant profits.
Buffett’s cautious approach is evidenced by the fact that his investment firm had over $180 billion in cash as of the end of the first quarter. The cash reserves were expected to swell to over $270 billion as of the end of June.
The cash reserves have been building up as the billionaire investor only invests in finding attractive deals with eye-popping returns. In a 2023 letter to shareholders, Buffett reiterated he did not see the possibility of eye-popping performance.
Buffett has consistently included dividend stocks in his portfolio, which is a strategy that has effectively generated consistent passive income. This year alone, his investments are projected to generate around $6 billion in dividend earnings.
Nevertheless, Buffett has also been in defensive mode in recent months, opting to reduce stakes in some companies. He has trimmed holdings by up to half in some tech giants, concerned by valuations getting out of hand after a year of gains fuelled by the artificial intelligence frenzy.
While valuations have gotten out of hand going by the blockbuster gains over the past year, there are still opportunities to unlock. With the US Federal Reserve poised to end its monetary easing spree with a cut of interest rates, equity is poised to receive a significant boost.
The best long-term stocks to buy, according to Warren Buffett, are companies well poised to benefit from interest rates dropping. Low interest rates make it easier for companies to access cheap capital to accelerate their operations, generating more shareholder value.
Our Methodology
To compile our selection of the best long-term stocks to buy according to Warren Buffett, we began by analyzing Berkshire Hathaway’s 13F portfolio and chose to highlight the stock holdings that have remained within the portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock, as of the end of the second quarter of this year. Finally, the stocks were ranked in ascending order based on the value of Warren Buffett stakes in the companies.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Long-Term Stocks to Buy According To Warren Buffett
12. Liberty Latin America Ltd. (NASDAQ:LILA)
Warren Buffett’s First Major Purchase: 2018
Berkshire Hathaway’s Latest Investment Stake: $25.28 Million
Number of Hedge Funds Holding Stakes as of Q2: 15
Liberty Latin America Ltd. (NASDAQ:LILA) is a communication services company that provides fixed mobile and subsea telecommunication services. Its core business offers communications and entertainment services, including video, broadband internet, fixed-line, telephony, and mobile services to residential and business customers.
The communication services company delivered impressive second-quarter results, with revenues totaling $1.1 billion. The telecom firm saw a significant increase in its subscriber base, adding 62,000 new customers during the first six months of the year, excluding Puerto Rico.
Liberty Latin America Ltd. (NASDAQ:LILA) also disclosed an OIBDA of $763 million, marked by considerable expansion in Panama and Costa Rica. Although encountering obstacles in Puerto Rico, the company is set to resume its upward trajectory by pursuing strategic mergers with Million and investing in fiber and 5G technology.
Liberty Latin America Ltd. (NASDAQ:LILA) has also revealed its plan to buy back shares and expects to see an increase in earnings throughout its range in the coming year. The firm has engaged in major mergers and purchases, such as with Tigor in Costa Rica and DISH in Puerto Rico. These moves are a key part of Liberty Latin America’s approach to boost landline and mobile services and bounce back to profitability.
While trading at a forward price-to-earnings multiple of 15, the stock appears undervalued going by the communication services average P/E of 28.
By the end of this year’s second quarter, 15 out of the 912 hedge funds surveyed by Insider Monkey had bought a stake in Liberty Latin America Ltd. (NASDAQ:LILA). Mark G. Schoeppner’s Quaker Capital Investments owned the most significant stake, which was worth $44.60 million.
11. Charter Communications, Inc. (NASDAQ:CHTR)
Warren Buffett’s First Major Purchase: 2016
Berkshire Hathaway’s Latest Investment Stake: $1.14 Billion
Number of Hedge Funds Holding Stakes as of Q2: 48
Charter Communications, Inc. (NASDAQ:CHTR) is a communication services company that offers broadband connectivity and viable connections to residential and commercial customers. The company has entered into a strategic collaboration with Warner Bros. Discovery Inc. to integrate linear video with streaming services. While the company is staring at stiff competition in the broadband market, weighing on core subscriber growth, it is enjoying some success in expanding into rural markets.
Charter Communications is also benefiting from a government program to expand broadband access in rural areas and with its push into mobile. Charter Communications, Inc. (NASDAQ:CHTR) delivered better-than-expected second-quarter results as it benefited from higher demand for its mobile service. Earnings per share (EPS) totaled $8.49, as revenues increased by less than 1% to $13.69 billion.
Its revenue growth has been modest at 0.23% over the last twelve months, suggesting a stable yet slow-paced expansion in the company’s top-line performance. Revenue from its mobile service jumped 36.9% to $737 million. Internet service, the company’s biggest segment, posted a 1.3% revenue gain to $5.81 billion.
The company is actively working towards a major improvement in its EBITDA in the latter part of 2024, motivated by its planned measures to cut down on costs. These actions are expected to keep the EBITDA steady throughout 2025.
Charter Communications, Inc. (NASDAQ:CHTR) trades at a P/E ratio of 9.24, signaling potential undervaluation, considering stocks in the communication service sector trade at an average P/E of 28.
48 out of the 912 hedge funds part of Insider Monkey’s Q2 2024 database had bought a stake in Charter Communications, Inc. (NASDAQ:CHTR). Natixis Global Asset Management’s Harris Associates owned the biggest stake, which was worth $1.89 billion.