2 top Warren Buffett stocks to buy and hold for the long haul

These are two of the Oracle of Omaha's biggest tech investments.

| More on:
a smiling woman holds up two fingers and winks.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

One of the keys to Warren Buffett's phenomenal success over the years has been his willingness to buy stocks of good companies possessing long runways of future growth at discounted prices and then hold them for the long haul.

Using exactly that strategy, Buffett has generated aggregate gains of 3,641,613% since taking control of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) in 1965, for a 20.1% compound annual growth rate (CAGR). In comparison, the S&P 500 has generated 30,209% in total returns over that period, for a CAGR of 10.5%. In other words, there's a good reason Buffett is referred to as the Oracle of Omaha and people buy, sell, and hold the same stocks he does. 

Buffett was relatively late in buying tech stocks, but he's made up for that since. The following pair of companies represent some of his biggest tech holdings. They fit neatly within his strategy, and you can also buy and hold them for the long run.

Apple

Apple (NASDAQ: AAPL) is not only Buffett's biggest tech holding but his largest holding overall, representing a whopping 41% of Berkshire Hathaway's total portfolio. With almost 1 billion shares under his management, the investing oracle has accumulated $128.2 billion worth of Apple stock. With shares down 23% from recent highs and at some of the lowest prices in the past year, it's a stock you might want to consider acquiring for your own portfolio.

The weakness has to do with the new iPhone 14, which reportedly faces weakening demand. The company reportedly reversed plans to hike production because of it, but such bearishness is all relative. 

The iPhone, which was unveiled in September and starts at $1,000, is still selling quite well, beating out low-cost entry-level models elsewhere, and Apple is still planning to produce some 90 million iPhone 14s, which is in line with its original forecast for the device.

Apple still commands about half of the U.S. smartphone market, despite the iPhone getting long in the tooth after having been first introduced 15 years ago. And MacBook shipments are going against the grain, with market intelligence firm IDC reporting shipments surging 40.2% in the third quarter compared with a 15% decline in global PC shipments. 

Yet, as much as hardware remains a driving force for Apple, services are the real growth opportunity going forward. Services account for 20% of total sales, though the company is not immune to economic concerns. Analysts estimate App Store revenue dropped 5% in September due to a sharp decline in gaming revenue as inflation and recession fears take a toll on consumers. Growth may be a little slower now than it was, but margins are rising, and at 71.5%, well above Apple's 43.3% overall gross margins.

There will be ups and downs in any business, but Apple will be commanding a leadership position for years to come and would be a stock to consider now and in the future.

Verisign

Although Buffett first bought Verisign (NASDAQ: VRSN) nearly a decade ago, he has not accumulated nearly as much of its stock as he has of Apple's. He owns 12.8 million shares, worth some $2.3 billion. Not shabby, but it represents only 0.7% of the Berkshire portfolio, so its rise and fall won't have as great of an impact on performance. Still, it's one that investors ought to consider as well.

Verisign is the premier global provider of domain name registry services. It's the main company charged with doling out the .com, .edu, .gov, and .net domain names you find on the internet, while providing the routing support for them. Its behind-the-scenes operations basically point people to the correct website when they type in any site ending in those designations, helping to keep the world online and connected.

Verisign ended the second quarter with 351.5 million domain name registrations across all top-level domains, all of which pay a fee to it annually. It's been likened to the exclusive toll collector on the internet's "toll road," and it enjoys high-margin recurring revenue while having conversely low capital requirements, leading to very stable free cash flow generation.

There's no likelihood the internet is going anywhere, and its importance to business, even in the face of a potential recession, only continues to grow. Certainly, there was a massive uptick in the number of people starting their own businesses during the early months of the pandemic -- and registering their domain names -- that has since normalized, but that just underscores the long-term upward trajectory Verisign has at its back.

Buffett first bought Verisign in the fourth quarter of 2012, investing $143 million at an average of around $42 per share. With near monopoly-like status in its industry, careful stewardship of its business, and a cash-rich stream of revenue, the growth thesis behind Buffett's purchase of Verisign is still very much intact. With shares down 30% year to date, it may be the perfect time to buy your own stake, too.   

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and VeriSign. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Man on his laptop standing next to data centres.
International Stock News

Nvidia stock nears its all-time high. Is it a buy now?

Nvidia blows away expectations again, and it still might be just getting started.

Read more »

Happy man working on his laptop.
International Stock News

Can Nvidia stock hit new heights? CEO Jensen Huang just provided clear and compelling evidence that the answer is "Yes."

The chipmaker just answered bears who feared the company's growth streak had stalled.

Read more »

A tech worker wearing a mask holds computer chip up to the camera.
International Stock News

Nvidia does it again

Nvidia shares have rallied more than 40% since 21 April.

Read more »

Semiconductor chip on top of piles of mini US and China flags.
International Stock News

Tariff negotiations could derail Nvidia's China business. Here's why I'm not worried about It.

New export controls around China could serve as a serious headwind for Nvidia.

Read more »

A head shot of legendary investor Warren Buffett speaking into a microphone at an event.
International Stock News

Warren Buffett-led Berkshire Hathaway has 21% of its $276 billion portfolio in 1 stock that's up 644% in 9 years

Investors need to know what company this is. Perhaps it deserves a closer look for your own portfolio.

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
International Stock News

Amazon just sent a massive warning to Nvidia investors

A new AI investment from the cloud computing leader could signal a shift in its strategy.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Countdown till Nvidia's earnings report: What to expect?

Nvidia reports Q1 earnings on May 28.

Read more »

A man in a suit face palms at the downturn happening with shares today.
International Stock News

Which Magnificent 7 company was threatened with fresh tariffs over the weekend?

The news was not well received by investors.

Read more »