Warren Buffett’s Timeless Picks: Stocks to Hold for Generational Wealth
Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, has mastered the strategy of investing in quality companies for the long term. His approach has resulted in a remarkable compounded annual growth rate of nearly 20% over 58 years, far exceeding the S&P 500’s 10% over the same timeframe. Buffett famously stated that his ideal holding period for a stock is “forever.”
Known as the Oracle of Omaha, Buffett has consistently held onto his favorite stocks, allowing them to generate income and value over time. For those interested in long-term investing, it makes sense to consider companies Buffett has favored for years. Here’s a closer look at two such stocks to consider buying and holding onto indefinitely.
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Coca-Cola: A Dividend Champion
Buffett made his initial investment in Coca-Cola (NYSE: KO) during the late 1980s and continued to buy shares until 1994. Berkshire Hathaway’s total investment reached $1.3 billion for 400 million shares, which they have retained to this day. A significant factor in Buffett’s loyalty is Coca-Cola’s commitment to paying and growing dividends.
In 1994, Berkshire Hathaway received $75 million in dividends, which skyrocketed to $704 million in 2022. “Growth occurred every year, just as certain as birthdays,” Buffett noted in a recent letter to shareholders.
Many investors may not have the funds to invest millions into Coca-Cola, but even small investments can yield consistent and increasing passive income that can be either enjoyed or reinvested. As a Dividend King, Coca-Cola has increased its dividend for over 50 consecutive years, demonstrating a strong commitment to its shareholders. With over $9 billion in free cash flow, Coca-Cola is well-positioned financially.
Buffett also emphasizes investing in companies that contribute to the U.S. economy. Coca-Cola, a leading non-alcoholic beverage producer, has exhibited steady revenue and profit growth over the years.
Currently, Coca-Cola shares are priced at 28 times trailing 12-month earnings—a figure that has remained consistent while revenues have increased—making it a reliable option for investors seeking growth and passive income.
Apple: A Growth Titan
This year, Buffett surprised the market by scaling back his stake in Apple (NASDAQ: AAPL), which is his largest holding. In the second quarter, Berkshire Hathaway reduced its Apple shares by 49%, leaving 400 million shares, following a 13% reduction in the first quarter. So why consider Apple if Buffett is selling?
Buffett mentioned the potential increase in capital gains tax as a reason for the reduction, suggesting that recent sales were aimed at securing profits rather than a shift in belief about the company. Interestingly, he now holds an equal number of shares in Apple and Coca-Cola, hinting that Apple, purchased in 2016, may be settling into a long-term holding.
Despite the sale, Apple remains Buffett’s biggest investment by value and displays the qualities he values most in an investment: market leadership, a strong competitive advantage, and a robust history of earnings growth.
Apple appears poised for continued growth, having built a significant base of over 2.2 billion active devices. This extensive network opens avenues for higher-margin services sales, including digital content and cloud storage, which have repeatedly broken revenue records.
Currently trading at 35 times trailing 12-month earnings, Apple is a compelling addition for investors looking to balance growth potential with a solid investment strategy, just as Buffett has done.
Investing in Coca-Cola: A Worthwhile Decision?
Before committing to Coca-Cola stock, consider this:
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author alone and do not necessarily reflect those of Nasdaq, Inc.
