3 Warren Buffett Stocks to Hold Forever
Key Points
Despite its massive size, Amazon has been growing at a double-digit percentage rate.
Mastercard is poised to grow its international business.
Lennar is a beaten-down home builder that's poised to make a comeback.
- These 10 stocks could mint the next wave of millionaires ›
It sometimes seems like billionaire investor Warren Buffett has been around forever. He's been at the helm of Berkshire Hathaway since 1970, and he's only just now planning to step down.
However, Buffett's brilliant stock investments will outlast him and continue to pay dividends (both literal and figurative) for decades.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
If you're looking for "set-it-and-forget-it" stocks that you can plan to hold forever, here are three perfect Buffett picks that fit the bill.
Image source: The Motley Fool.
1. Amazon
Amazon (NASDAQ: AMZN) continues to gobble up e-commerce share in the U.S. and around the globe, and with just 16.3% of retail sales in the U.S. occurring online, there's plenty of room to grow that business. The company's recent introduction of its "Add to Delivery" service for Prime members -- allowing them to add items to deliveries that are already scheduled -- could provide an additional boost to the company's e-commerce profits.
However, although e-commerce brings in the bulk of Amazon's revenue, the company derives more operating income from its high-margin Amazon Web Services (AWS) cloud computing business. Like e-commerce, that business is also showing no signs of flagging growth, with 17% year-over-year net revenue growth in the most recent quarter, and 8.8% growth in operating income to $10.2 billion.
The fact that a multi-trillion dollar company is still posting such robust growth numbers indicates that it's likely to continue to be an unstoppable juggernaut over the long term, and a perfect Buffett stock to buy and hold.
2. Mastercard
Buffett has owned shares of payment processor Mastercard (NYSE: MA) since 2011, and during that time those shares have given him a more-than-2,000% return, and that's not even factoring in the company's small dividend, which currently yields about 0.6%.
However, even if it didn't pay a dividend at all, Mastercard would be an obvious choice to buy and hold forever. The company has a global reach, with 1.1 billion Mastercard credit cards currently in circulation worldwide. In fact, nearly one-third of all credit cards in the world bear the Mastercard logo. And although the company processed $9.8 trillion in global transactions in 2024, U.S. purchase volume only made up $2.8 trillion of that amount, which is still a 7.4% year-over-year increase.
The U.S. credit card market is already pretty saturated with 82% of adults owning at least one credit card. However, rising global wealth and deployment of more sophisticated digital financial systems across the developing world mean that there's plenty of room to grow in international markets, where Mastercard's outsized presence has it primed for further growth.
3. Lennar
One of Buffett's most recent stock buys, home builder Lennar (NYSE: LEN) (NYSE: LEN.B) is a classic Buffett pick. It's a major player in a stable industry that has seen the price of its shares decline by 30% over the past year.
Lennar's shareholder-friendly management pays a dividend that currently yields a respectable-but-not-outstanding 1.6%. However, the company has also been aggressive about buying back shares for the last several years, including 4.1 million shares in the most recent quarter alone.
These buybacks have dropped the outstanding share count from 325 million in 2018 to just 255 million today. That 22% decrease in outstanding shares has increased the value of each existing share, and is one reason that the company's price-to-earnings ratio is a reasonable 12.3 today, which is comparable to other industry players.
Another reason for the company's affordability is the lackluster state of the U.S. housing market. The Federal Reserve's benchmark interest rate -- which has a big impact on mortgage rates -- has been high for years, which has depressed housing demand.
Even before rates skyrocketed in 2022, though, the U.S. was in the midst of a decades-long housing shortage, so there should be no shortage of demand for the homes Lennar builds once interest rates fall further. Although this investment is likely to see cyclical ups and downs as the residential housing market ebbs and flows, now looks like a good time to buy the dip of this classic Buffett stock.
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John Bromels has positions in Amazon, Berkshire Hathaway, and Mastercard. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Lennar, and Mastercard. The Motley Fool has a disclosure policy.
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