3 Warren Buffett Stocks to Buy and Hold Forever

Susan Dziubinski: I’m Susan Dziubinski, co-host of The Morning Filter podcast. Berkshire Hathaway BRK.A BRK.B recently revealed it’d taken a $4.3 billion position in Alphabet GOOGL. The purchase took many Berkshire Hathaway watchers by surprise. After all, Buffett hasn’t been much of a tech investor. In fact, he has said that he views top-holding Apple AAPL as more of a consumer stock than a technology play. Yet, given that Alphabet is now among Berkshire’s top 10 holdings, Buffett more than likely gave his stamp of approval to the purchase.

Now, it remains to be seen whether Alphabet will become one of what Buffett has called Berkshire’s “forever stocks.” What makes some stocks qualify as forever holdings? Well, Buffett says these companies make him comfortable because they are hugely successful in their base businesses. Plus, the products and services that these companies provide travel, meaning that they’ve become worldwide brands and essentials of the world we live in.

Today we’re looking at three of the stocks that Buffett says he expects Berkshire to own indefinitely—probably well beyond his retirement as CEO at the end of this year. We suggest investors keep these stocks on a watchlist and buy when they trade below our fair value estimates.

3 Warren Buffett Stocks to Buy and Hold Forever

1. Coca-Cola KO
2. American Express AXP
3. Occidental Petroleum OXY

The first forever stock in Berkshire’s portfolio is Coca-Cola. Berkshire owns about 9% of Coke’s outstanding shares. Coke is a classic Warren Buffett business. The world’s best-known beverage company has built a wide economic moat around its business with its storied brands, a loyal following, and significant cost advantages. The company dominates the carbonated and soft drink market and, as a result, generates predictable cash flows. And Coke’s management team has done an exceptional job of maintaining a healthy balance sheet that can withstand economic uncertainties and making astute investments to benefit top-line growth. The company has also consistently returned cash to shareholders via share repurchases and dividends. We think Coke’s stock is worth $74.

Read Morningstar’s full report on Coca-Cola.

The second stock Berkshire plans to hold indefinitely is American Express. Berkshire owns more than 20% of the company’s stock. American Express has carved out a wide economic moat with its closed-loop network. The firm issues credit cards, operates the payment network, and maintains a direct relationship with the merchant, which allows it to capture the full economic profit from a single credit card payment. And as a result, the company is less reliant on net interest income than its competitors. The company maintains an enviable position with small and midsize businesses in America, which solidifies its strong financial position.

Read Morningstar’s full report on American Express.

The final forever stock in Berkshire Hathaway’s publicly traded portfolio is Occidental Petroleum. Berkshire owns more than 26% of the company’s outstanding shares. Oxy is one of the world’s largest independent oil and gas producers. Now, Morningstar doesn’t think Oxy has an economic moat, due largely to the expensive acquisition of Anadarko Petroleum in 2019. But management has been deleveraging the company’s balance sheet, and we think the books look better than they have in several years. The company’s sale of OxyChem—to Berkshire Hathaway—will help it to leverage further. We think the stock is worth $64 per share.

Read Morningstar’s full report on Occidental Petroleum.

For more stock ideas, tune into The Morning Filter each week, wherever you get your podcasts. And visit Morningstar.com, too.

Morningstar director Josh Aguilar and analysts Michael Miller and Dan Su provided the research behind this segment.

Watch 3 Top Stocks to Buy This Holiday Season for more from Susan Dziubinski.