2 Warren Buffett stocks to buy and hold forever

Patient investors will likely do well holding on to these two stocks for a very long time.

| More on:
Young male investor smiling looking at laptop as the share price of ASX ETF CRYP goes higher today

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.

When looking for long-term stock holdings, following multi-billionaire Warren Buffett's investments is a good place to start. He's certainly built a long-term track record, but he's also known for his patient approach. One of his sayings is, "Our favorite holding period is forever."

It's tempting to follow Buffett's stock picks blindly, but you still should do your own homework. After all, he's not infallible. These two stocks have been a part of Berkshire Hathaway's portfolio for some time. While their prices are down for the year, both offer excellent long-term growth prospects, presenting a wealth-creating opportunity.

1. Amazon

Amazon's (NASDAQ: AMZN) stock investors have become a little skittish this year. The stock has dropped by more than 37% since the start of 2022, making this a good time to evaluate the company's long-term growth prospects. Fortunately, these look solid.

Looking at Amazon's first-quarter results, sales grew 9% to $116.4 billion, excluding foreign currency exchange translations, but operating income was down by over 58% to $3.7 billion. While this isn't great, it looks likely that Amazon will get back to growing profits down the road. That's because higher costs weighed on profitability as management increased staffing and capacity to meet surging demand, but management has pledged to focus on higher productivity and efficiency.

Even better, its fast-growing, high-margin Amazon Web Services (AWS) business still has bright prospects. In the latest period, AWS' sales increased by 36.6% to $18.4 billion, driving operating income 56.6% higher to $6.5 billion. It was the only segment to report a profit in the latest period.

With an over 35% operating margin, this dwarfs the North American and International segments, which are typically single-digit figures. AWS, the leader in the fast-growing cloud computing business with a 33% market share, faces little competition. Its main rivals are Microsoft's Azure and Alphabet. Better still, the business has significant barriers to entry due to the high cost and space needed for data centers.

The price-to-earnings ratio (P/E) of 50.4 is well below the 80 times it was selling for in April. While Amazon's P/E is higher than the S&P 500's 20 times, as Warren Buffett has stated, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

2. Moody's

Moody's (NYSE: MCO) stock may have fallen by about 31% this year, but the company's long-term competitive position remains strong. So this looks like an opportune time to purchase shares. 

The company has become known for providing ratings on debt instruments issued by corporations and countries, among other entities. Along with S&P Global, it has a dominant share of the market, with Fitch Ratings coming in a distant third place. Last year, this business produced revenue of $3.8 billion, accounting for over 61% of the total.

There's also its analytics business, which represented the balance of Moody's revenue. While the rating business' results can fluctuate, depending on the economic cycle and debt issuance, this business is steadier since it charges subscription fees for items like data and information.

Moody's first-quarter revenue fell by 4.9% to $1.5 billion. However, the period showed the benefit of having the fee-based analytics business. While the rating business' revenue declined by 20% to $827 million, analytics increased by 9% after excluding the impact of acquired businesses.

The stock currently has a 26 P/E multiple, much lower than the roughly 32 times when 2022 began. With a strong ratings business that will certainly rebound when the markets recover and a growing analytics segment, the stock looks like a bargain for long-term stock investors.

Two stocks to celebrate down the road

Amazon has a strong brand in retailing, but it's become so much more than an online seller. It generates considerable revenue and profits from its AWS business, which looks like it can continue growing quickly for a considerable period. Moody's franchise includes ratings, which debt issuers pay for and many people rely on, plus a steadily growing analytics business.

When you add in that these two stocks currently sell at a much lower valuation than earlier in the year, long-term investors who purchase them likely will have a lot to celebrate when looking back to this moment. 

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

Lawrence Rothman, CFA has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), Microsoft, and Moody's. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Berkshire Hathaway (B shares). 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

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
International Stock News

Prediction: This artificial intelligence (AI) stock could be the next Nvidia — and it's not what you think

Let's take a closer look at that name and see why it could turn out to be a solid addition…

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

Worried about Tesla's Robotaxi? These two words from Nvidia CEO Jensen Huang might change your mind.

Investors are on the edge of their seats as Tesla's robotaxi launch is reportedly around the corner.

Read more »

AI written in blue on a digital chip.
International Stock News

Warren Buffett has 23% of Berkshire Hathaway's portfolio invested in 2 AI stocks up 600% and 900% in the last decade

Here's what investors should know about these two stocks.

Read more »

Happy woman working on a laptop.
International Stock News

Want to invest in quantum computing? 3 stocks that are great buys right now.

They all give investors direct exposure to quantum computing, but aren't the all-or-nothing bets that some investors may regret going…

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

Billionaire Dan Loeb just sold Meta and Tesla stocks and piled into this hot AI stock up 1,500% over the past 5 years

Let's see what investors are thinking about these stocks today.

Read more »

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

Warren Buffett just spent $1.8 billion on 7 stocks. Here's the best of the bunch

Buffett's relatively small investments could be big opportunities for individual investors.

Read more »

Woman and man calculating a dividend yield.
International Stock News

This monster streaming stock has quietly crushed Netflix in 2025. Could a stock split be on the horizon?

Streaming stocks have crushed the market this year, and one name in particular has blown Netflix out of the water.

Read more »

Amazon boxes stacked up on a doorstep.
International Stock News

Why Amazon stock still looks like a long-term winner

Now might be a great time to add this dominant enterprise to your portfolio.

Read more »