Which person comes to mind first when you hear the phrase “Invest for the long term”? I suspect for many, it’s Warren Buffett. The investing icon has promoted a long-term mindset for decades. And he has practiced what he preaches.
But which of the stocks currently in Buffett’s portfolio are the top choices for long-term investors? Here are my picks for the three best Buffett stocks to buy for the long haul.
1. Berkshire Hathaway
The obvious top choice, in my view, is Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Between 1965 and 2021, Berkshire delivered an astounding compound annual growth rate of 20.1%, nearly double the return of the S&P 500. It has also beaten the S&P so far this year despite sliding somewhat. Unsurprisingly, the only stock that Buffett has bought in both of the last two bear markets is none other than Berkshire itself.
This past performance isn’t my main reason for choosing Berkshire, though. Investing in it is almost like buying shares of an exchange-traded fund.
Berkshire is made up of more than 60 companies, including huge insurance, railroad, and energy businesses, plus lots of smaller units. It also holds equity stakes in nearly 50 publicly traded companies.
This significant diversification across multiple industries should make it an excellent pick over the long term. It certainly doesn’t hurt that you also benefit from the experience and wisdom of two outstanding investors: Buffett and his partner, Charlie Munger.
Buffett has added only eight new stocks to Berkshire’s portfolio this year. I agree with my Motley Fool colleague Matthew Frankel that Markel (NYSE: MKL) is the best of the bunch.
I like Markel for many of the same reasons that I like Berkshire. It has performed well over time (and is beating the S&P so far this year). It also offers diversification similar to what Berkshire does.
Like Berkshire, Markel operates multiple businesses. Its primary focus is specialty insurance. The company’s Markel Ventures also owns controlling interests in 19 companies that operate in a variety of industries.
It also invests in other publicly traded companies, as Berkshire does. It has a larger and more diverse portfolio than Berkshire. However, there are quite a few common denominators between the two. Its management team also shares that same long-term mindset.
Apple (NASDAQ: AAPL) ranks as the biggest holding in Berkshire’s portfolio by far. Buffett even refers to it as one of Berkshire’s “four giants,” even though the conglomerate owns less than 6% of the tech company.
If you only looked at Apple’s short-term performance, you might question this pick. The stock is down around 20% year to date. But it has been a huge winner over the long term.
Buffett obviously believes that Apple will continue those winning ways. I fully agree. The company’s iPhone-centric ecosystem will almost certainly expand over time.
I especially like Apple’s prospects in augmented reality (AR). CEO Tim Cook recently stated in an interview with the Dutch magazine Bright, “I think AR is a profound technology that will affect everything.” My hunch is that he will be proved right. And Apple should be one of the leaders in making it happen.
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Keith Speights has positions in Apple and Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Apple, Berkshire Hathaway (B shares), and Markel. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.