3 Warren Buffett Stocks to Hold Forever | The Motley Fool (2024)

Are you looking for some new "forever" stocks to add to your portfolio? If you are, consider poaching a few picks already made by Warren Buffett and his acolytes for Berkshire Hathaway.The fund regularly outperforms the broad market over time, after all, and the Oracle of Omaha proudly proclaims that his favorite holding period is forever. Its holdings are well suited to do the job.

With that as the backdrop (and in no particular order), here's a rundown of three Warren Buffett stocks you can step into today with plans to never let go of them.

1. Amazon

Buffett's never been a big fan of technology stocks, eschewing businesses he doesn't understand. That's why Berkshire's first purchase of Amazon (AMZN -0.83%) back in 2019 was a bit surprising.

However, the position arguably shouldn't be all that shocking.

Amazon's business lines aren't even a little bit complicated. The company is just very good at what it does, which is leading the cloud computing market and dominating the e-commerce market. Both industries are clearly going to be around for a long time, and it's tough to dethrone an organization that's already established itself as a market leader if for no other reason than the fact its sheer size offers options rivals simply don't have.

Take Amazon's newest profit center as an example. That's advertising or paid promotions from Amazon.com's third-party sellers. The company's done nearly $44 billion worth of high-margin ad business over the course of the past four reported quarters, with the fiscal third quarter's figure growing 25% year over year.

The organization is able to offer meaningful degrees of advertising services simply because it's already the most-visited e-commerce website in the world. Numbers from online marketing support outfit Semrush suggest that Amazon.com handles about 4 billion visits per month, trouncing the traffic that competitors such as Walmart and eBay draw to their respective online shopping websites.

Meanwhile, data from Synergy Research indicates Amazon's share of the worldwide cloud computing market is holding at around a market-leading 33%.

Buffett's Berkshire Hathaway doesn't hold a ton of Amazon shares, for the record. Indeed, its 10 million-share stake is worth around $1.5 billion. That's only 0.1% of Amazon's market cap and less than 1% of the combined value of stocks held by Berkshire Hathaway; Berkshire has even been trimming its stake in the e-commerce giant this year.

The fact that Buffett is allowing any position in Amazon at all, however, is telling.

2. Mastercard

You already know that Mastercard (MA 0.37%) is a credit card middleman. It's the world's biggest, in fact, facilitating the purchase of $8.8 trillion worth of goods and services over the course of the past four reported quarters. That's more than 165 billion transactions.

Mastercard collects a few cents for each of these purchases, translating into what should be in the ballpark of $25 billion in revenue this year. Of that, roughly one-third is typically turned into net income. This is a high-margin business, to be sure.

That's not apt to be the top reason Berkshire Hathaway has been sitting on roughly 4 million shares of Mastercard since 2011, however. It's not the dividend, either, as Mastercard's current dividend yield is a paltry 0.6%.

Rather, the biggest reason Buffett is such a fan of this company is more likely to be its reliable top and bottom-line growth. With the exception of 2020, when the COVID-19 pandemic largely kept the world stuck at home, revenue hasn't failed to grow on a year-over-year basis in any quarter in more than a decade. Net income growth has been almost as consistent.

MA Revenue (Quarterly) data by YCharts

This company's consistent results reflect the world's ongoing shift away from using cash and toward easier, more convenient ways of doing business. Meanwhile, its more recent and projected growth reflects Mastercard's foray into cross-border payments, making it easier for consumers and companies alike to buy and sell overseas goods.

Mastercard shares won't come cheap. The stock's trading at 37 times more than trailing-12-month per-share profits and nearly 30 times its expected earnings for the next four quarterly reports. It's still arguably worth this steep price, though. As Buffett explains, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

3. Citigroup

Finally, add megabank Citigroup (C -0.36%) to your list of Warren Buffett stocks to scoop up.

It's not the biggest banking position Berkshire Hathaway is currently holding. That honor belongs to Bank of America -- a $28 billion stake that dwarfs Berkshire's 50 million-share trade in Citi that's worth a little over $2 billion. BofA is also bigger than Citigroup as measured by assets, and Bank of America is topped by JPMorgan Chase by the same measure. That's a key reason JPMorgan and BofA are also more often recommended as prospective stock picks.

Citigroup shares have an edge on these other two banks right now, though, and an edge on most other banking stocks, for that matter. That's its valuation. Thanks to the stock's relatively poor performance since 2020, despite the company's revenue and earnings growth revival since then, Citi shares are much cheaper than its peers. You can step into a stake while shares are trading at just a little over their trailing and projected price-to-earnings ratios. Better yet, you'll be plugging into a stock with a dividend yield of 4.1%.

That's based on a dividend, by the way, that had been regularly rising until the COVID-19 pandemic took hold in 2020 and is finally climbing again despite Citigroup's so-so stress-test results.

Doubters and critics could argue that the corporate shakeup underway by Citi CEO Jane Fraser makes it the wrong time to buy a piece of the company. We don't know what Citigroup might look like when all is said and done. It may also take some time for the bank's employees to get fully up to speed with its new structure. In fact, fears of this shakeup are a big reason Citi's stock has underperformed this year.

This is a case, however, where would-be investors must be forward-minded rather than backward-looking, having faith that a streamlined Citigroup will be better off once these difficult changes are put in place.

Bolstering its bullish case is the prospect of rate cuts in 2024, which will do the entire banking industry more good than the harm that rising interest rates have inflicted of late; lower borrowing costs could rekindle interest in borrowing money again. Beyond that nudge, Citigroup's long-term track record speaks for itself.