2 Warren Buffett Stocks to Hold Forever

Key Points

• Buffett got into one of these players later than he would have liked -- but he’s still benefited greatly from the purchase.

• The second stock here is a long-term Buffett holding with a solid moat.

• 10 stocks we like better than Amazon ›

Investors keep a close eye on what Warren Buffett is doing, because the billionaire investor has shown his expertise in stock-picking over time. He looks for solid businesses, trading at reasonable valuations, that are worth holding on to for the long haul -- Buffett once said his ideal holding period is "forever." (A perfect example is beverage giant Coca-Cola, a stock he bought in the late 1980s and has owned ever since.)

As chairman of Berkshire Hathaway, Buffett's proven that this strategy works, achieving a compounded annual gain of nearly 20% over 59 years. By comparison, the S&P 500 has delivered a compounded annual increase of about 10% over that time period.

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Considering this, let's check out two Buffett stocks that you might want to make a permanent part of your portfolio...

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1. Amazon

Buffett's involvement with Amazon (NASDAQ: AMZN) got off to a rocky start. By this, I mean, Buffett didn't buy Amazon in its early days and later said he made a mistake for not recognizing its potential. But a member of Buffett's investment team may have thought "better late than never," as he added Amazon to the Berkshire Hathaway portfolio in 2019.

Since that purchase, Amazon shares have advanced more than 100% -- and the opportunity for gains is far from over. You probably know Amazon best for its e-commerce business, but the company also is a huge player in the cloud computing market. In fact, Amazon Web Services (AWS) is the world's leading cloud company -- and it's Amazon's biggest profit driver.

What's really exciting moving forward is Amazon is well positioned to benefit from what may soon be a trillion-dollar market: artificial intelligence (AI). Amazon is using AI to boost efficiency and reduce costs in its e-commerce business, and AWS offers AI products and services to its customers. AI already is demonstrating its growth power at AWS, helping the unit reach a $123 billion annual revenue run rate. And, over time, Amazon's use of AI across its business should progressively streamline operations and favor earnings growth.

Today, you can buy Amazon at a very reasonable price, as it trades for 34 times forward earnings estimates, down from more than 50 last year. All of this makes now a great time to get in on this stock, and thanks to Amazon's leadership in the growth markets of e-commerce and cloud computing, hold on for the long run.

2. American Express

American Express (NYSE: AXP) is a longtime holding of Buffett's, and he likely loves the company for its strong moat, or competitive advantage -- the payment card company caters to higher-income customers worldwide, offering a range of perks that have kept users and revenues growing. It would be very difficult for another player to replicate this model and unseat American Express.

The company has delivered a track record of earnings growth over time, and importantly, in recent quarters, it's seen growing momentum in younger populations. For example, in the latest quarter, 63% of global consumer new accounts acquired were from millennial and gen-z consumers.

Also in the quarter, revenue climbed 9% to a record $17.9 billion, and card member spending hit a quarterly high. American Express reported a 17% gain in adjusted earnings per share, and based on the positive trends across the board, reiterated full-year revenue and earnings guidance.

What I particularly like about American Express is that, even when economic times are troubled, the card company may continue to excel -- since its cardholders often are more affluent, they are less sensitive to fluctuations in the economy and may continue to spend as usual.

American Express trades for 21 times forward earnings estimates today, higher than levels of less than 15 about a year ago -- but I still consider this a reasonable entry point for an investor aiming to buy and hold for a number of years.

Finally, Warren Buffett had a few words in particular to say about American Express (and Coca-Cola) in his 2023 letter to shareholders: "The lesson from Coke and AmEx? When you find a truly wonderful business, stick with it."

Should you invest $1,000 in Amazon right now?

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American Express is an advertising partner of Motley Fool Money. Adria Cimino has positions in Amazon and American Express. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool has a disclosure policy.