The 2 best Buffett stocks you can buy and keep in the long run

Buying the same stocks as famed investor Warren Buffett won’t turn you into a billionaire, but it can steer your portfolio in the right direction. Invest $ 1,000 in Berkshire Hathaway (BRK.A -0.40%) (BRK.B 0.06%) In 1965, when Buffett took over, it would be worth about $ 28 million today. This is the result of buying large companies when they sell below their intrinsic value.

Let’s look at investment cases for Verizon Communications (VZ 0.90%) and Apple (AAPL 0.47%). These are Berkshire’s two largest stakes and can be excellent stocks for long-term investment.

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1. Verizon

Verizon fits into the typical stocks Buffett is looking for: an industry leader that generates consistent revenue and profits. The wireless service provider was one of Berkshire Hathaway’s largest stocks at the end of 2021. Berkshire’s latest annual report shows it owns 3.8% of the total stock it owns, with a cost base of $ 9.4 billion.

Verizon operates a wireless network that consistently attracts high customer praise, leading to the lowest outflow rate in the industry. It reaches 30 million households with fixed wireless services and leads the introduction of 5G wireless technology. The administration recently set a goal of achieving incremental growth of $ 14 billion in services and other revenues by 2025. More than 75% of growth is expected to come from 5G mobility and broadband access across the country.

A large base of satisfied customers turns into a steady income every year and dividends for shareholders. Over the past four quarters, Verizon generated $ 21 billion in revenue with $ 134 billion in revenue. It paid half of its profits to shareholders, bringing the dividend yield to an attractive 5.3%.

Verizon has been increasing its dividend for 15 consecutive years, boosting the strength of its business and confidence in the future. It’s certainly a tempting buy right now, trading nine times behind earnings on top of that tempting dividend yield.

2. Apple

Apple is Berkshire’s largest holding company. At the end of 2021, Berkshire Hathaway owned 5.6% of iPhone manufacturers. Apple is one of the biggest investments Buffett has ever made. At the end of 2021, Berkshire’s reported cost base for investing in Apple was $ 31 billion, with a market value of $ 161 billion. This is already proving to be one of the biggest investments in Buffett’s career.

Again, Apple seems to be a classic Buffett investment. Apple has achieved incomparable customer satisfaction and loyalty. That’s a strong advantage with a growing base of 1.8 billion active devices at the start of the year. With millions of customers with credit cards stored in their Apple account, this large installed base is turning into a growing demand for app sales and higher-margin subscriptions.

Between fiscal 2019 and fiscal 2021 (which ended in September), revenue from Apple’s services grew at an overall annual rate of 27% per year. Apple recorded a 17% increase in service revenue in March, bringing this lucrative revenue stream to 20% of Apple’s business.

The growth of services makes a very profitable company even more profitable. Over the past four quarters, it generated $ 105 billion in free cash flow with $ 386 billion in revenue. He paid 14% of his profit in the form of dividends, bringing the dividend yield to 0.58%.

Shares aren’t as cheap as Verizon, but with a price-to-earnings ratio of 25.6, it’s hard to call Apple shares expensive. The price seems appropriate, given Apple’s growth prospects and brand power.

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