Warren Buffett, one of the most successful investors in history believes in long-term investment stocks. As he has famously said, â€œIf you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.â€
Buffett swears by a buy and hold investing strategy, which essentially refers to a strategy where one buys a security and then keeps it in the portfolio over a long period of time. Over a short period of time, the value of securities tends to fluctuate, but over a longer period, a stock is expected to appreciate if the fundamentals are in place. In this article, we take a look at 4 stocks Buffett has either held for 5 years or more or even for over 30 years!
Buffett, who had avoided investing in tech stocks for 95% of his career, started buying Apple (AAPL) stocks in 2016. He acquired 887 million shares of Apple in the next two years to own a 5.4% stake in the company. His investment in Apple is now worth over $160 billion as Apple became the first company to hit the $ 3 trillion market cap. His Apple holding now constitutes more than 40% of his equity portfolio. Also, he earns a staggering average annual dividend of $ 775 million from Apple!
Buffett invested in Apple because he believed in the power of the brand and its ecosystem and not due to its short-term financial results. This is in line with his strategy to pick long-term investment stocks. In an interview with CNBC, he said, â€œI do not focus on the sales in the next quarter or the next year,â€ he said. â€œI focus on the … hundreds, hundreds, hundreds millions of people who practically live their lives by it [iPhone]. When asked if he thought that the iPhone was overpriced, he said that he believed that it was ‘enormously underpriced.’
Bank of America
Bank of America Corporation Â (BAC) is by far Buffett’s largest investment in a bank stock. As of December 2021, this was Buffett’s second-largest holding and he held 1.01 billion shares of the company worth over $45 billion. Buffett began investing in Bank of America stocks in 2011 when he invested $5 billion in preferred shares at the time when the bank was facing legal issues in the aftermath of the debt crisis. These shares would be redeemable at a 5% premium and would pay a 6% dividend. Berkshire also received stock warrants which would let it buy 700 million of the bank’s common shares at a certain price over the next 10 years.Â
Why did Buffett invest in Bank of America? Its strong leadership and its profit-generating abilities. Also, he strongly believed in the customer-centric approach at the company.Â
Warren Buffett’s love for Coca-Cola (KO) goes beyond his investments in it. He drinks 5 12-ounce servings of Coca-Cola daily and famously told Fortune in 2015, â€œI am one-quarter Coke.â€ When it comes to his investments, he bought $1 billion worth of Coca-Cola stocks in 1988 and has held on to it for over 30 years, making it the stock that he has held for the longest time. This was equivalent to 6.2% of the company at that time. The stock has registered a gain of over 2000% since then and was his 4th largest holding in December 2021, valued at $21.6 billion. Also, he earned $672 million in dividends from Coca-Cola last year.Â
Interestingly, Coca-Cola was hard hit in the stock market crash of 1987. But Buffett believed in the fundamentals of the company and realized that it offered good value and had a strong brand. Buffett’s bet with Coca-Cola was then considered risky, but he believed in the long-term growth potential of the company. In the Berkshire Hathaway Chairman’s Letter to Shareholders of 1988, it is said, â€œIn 1988 we made major purchases of Federal Home Loan Mortgage … and Coca Cola. We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.â€
While Buffett believes in long-term investment stocks, he does sell off a stock and decrease his holdings in a company when he sees a valid reason.Â A case in point would be Wells Fargo & Company (WFC). Buffett began investing in the stock in 1989 and invested $12.7 billion in the company. As recently as 2017 he held a 10% stake in the company with a holding of more than $29 billion. In May 2021, he divested almost all of his stake in the company, owning just $26 million worth shares in the company as of 31 March 2021. Why did he do this? A fake accounts scandal and regulatory sanctions..Â
However, Well’s Fargo remains one of Buffett’s most successful long-term investments. He invested in Wells Fargo because he believed it was a strong company at a good value. Also, as he mentioned in the shareholder letter 1990, ‘With Wells Fargo, we think we have obtained the best managers in the business.’ Once invested, he lets the management teams take care of a business over the long term.Â
One investment lesson we can thus learn from Warren Buffett is that one should invest with a long-term view. The markets always reward an investor who believes in a stock and holds it for the long term.
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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.
This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.
This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.