3 Buffett Stocks to Hold Long Term

Buffett Stocks to Hold Long Term: Legendary value investor Warren Buffett has a long history of selecting top stocks for inclusion in the prestigious portfolio of his Berkshire Hathaway holding company.

 

While Buffett is known for buying stocks when they are considerably undervalued, some of the shares held by Berkshire could be excellent buy-and-hold options in today’s market.

 

Here are three of the top Buffett stocks to consider holding for the long haul.

 

Apple (NASDAQ:AAPL) is the oracle of Omaha’s single largest holding, making up just under half of the Berkshire Hathaway portfolio.

 

When Buffett initially bought a 5 percent stake in Apple in 2018, the total value of the stock was $36 billion. The move has been undeniably profitable, as Berkshire’s holdings in Apple reached over $160 billion at the start of 2022.

Despite its enormous success and high valuation, it appears that Apple stock still has plenty of runway left.

 

The median target price for the stock over the next 12 months is $190.50, up more than 36 percent from the current price of $139.62.

 

For the quarter ending on December 25th, Apple also posted a series of beats when compared against analyst expectations.

 

EPS rose by 25 percent year-over-year, while revenue jumped 11 percent to a record high of $123.9 billion.

The most attractive aspect of Apple at the moment is its growing list of services. With higher margins and less exposure to supply chain problems, Apple’s services could buoy the company through a period of difficulty for its devices.

 

Gross margins for services are over 70 percent, compared with about 36 percent for products.

 

One difficulty Apple does face right now is its pricing. The stock currently trades at a P/E ratio of 23.97 and a price-to-book of 35.18. These metrics have the stock looking fairly expensive, raising the possibility that it could slide further before it begins to rebound.

 

For investors with a buy-and-hold strategy, however, these pricing metrics are slightly less concerning. Apple’s robust growth should overcome slight valuation problems over the long run, resulting in a continuation of solid returns.

 

Verizon (NYSE:VZ) represents a much smaller share of Berkshire Hathaway’s portfolio than Apple, but it is still a very strong performer for buy-and-hold investors.

 

The company is the largest wireless network in America, making it uniquely positioned to benefit from the adoption of 5G technology over the next few years.

 

Despite facing some headwinds, Verizon is still turning in decent growth numbers. In Q1, wireless revenue rose 9.5 percent, while revenue per account rose by 2.6.

The most notable feature of Verizon as a stock is its generous dividend. At the time of this writing, Verizon’s yield stands at 5.32 percent for an annual payout of $2.56 per share.

 

Given the relatively low yields most dividend-paying stocks produce these days, this makes Verizon an outstanding asset to hold for income.

 

Verizon is also priced quite favorably, holding a P/E ratio of just 8.87, which suggests it may be somewhat undervalued.

 

This view is supported by a median analyst price target of $57, which would put the stock up by 18.7 percent over its current price of $48.01 in the coming 12 months.

 

Verizon’s cash flow is also quite attractive, with each share producing $9.19 compared to an industry average of just $3.78.

Given its decent potential upside and high dividend yield, Verizon could be an excellent stock to buy and hold indefinitely. The advent of 5G technology will likely support higher revenues going forward, and the steady dividend the stock offers should make it an attractive income option for most portfolios.

 

One factor investors should be aware of now, however, is the company’s relatively large debt load. With $140 billion in long-term debt, rising interest rates could weigh on Verizon. However, the company looks to be in a good position to keep its dividend up, even if higher rates do impose additional costs.

 

Much less well-known than the other two stocks on this list, STORE Capital (NYSE:STOR) is the sole REIT in Berkshire’s portfolio.

 

The company manages a highly diversified portfolio of over 2,900 properties throughout the United States.

 

STORE also has a somewhat unique business model that involves buying properties from current owners and then immediately leasing the properties back to them. This allows the owners to access equity while giving STORE instant tenants for its properties.

One of the most important advantages of STORE is the fact that it raises its rents annually. As a result, the business is largely immune to ordinary rates of inflation. Tenants also take on the responsibility for maintaining the properties they lease, allowing STORE Capital to operate on a reasonably low overhead.

 

Like all REITs, STORE Capital pays out a large amount of its income in dividends. The current yield for shares of STORE is 5.88 percent, resulting in an annual payout of $1.54 per share.

 

STORE may also have upside for investors who buy the dip, as the median target price of $33.50 is 26.7 percent above the current price of $26.44. It should be noted, however, that the stock sold off significantly when markets got rocky.

 

In other words, the rebound would be more of a correction coming off of the current market dip than a new surge of value.

Given its advantageous business model and high yield, STORE looks like a good buy-and-hold option at the moment.

 

STORE is most likely fairly valued at the moment. The stock has a P/E ratio of 12.26 and a price-to-book of 1.38. However, its income potential more than makes up for a lack of undiscovered value.

 

Investors who buy and hold this trust over the long run and reinvest their dividends should see substantial growth and eventually be able to draw off a healthy stream of income.

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