Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has a knack for making himself, and his shareholders, a lot of money. Since 1965, Berkshire Hathaway stock has averaged a compound annual gain of 20.3%, which works out to an aggregate gain of 2,744,062% over the past 55 years. Suffice it to say, he might know a thing or two about investing.
While investors often point to the Oracle of Omaha's ability to find value in plain sight, as well as his focus on businesses with sustainable competitive advantages, maybe the most important puzzle piece to Buffett's success has been his willingness to buy great companies and hold them for very long periods of time. According to Form 13F aggregator WhaleWisdom.com, the average top-10 holding for Buffett, by market value, has been owned for more than eight years.
Below, you'll find Buffett's 11 longest-held stocks, all of which have been continuously owned by Berkshire Hathaway for at least the past 14 years.
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Coca-Cola: 32 years
The longest-tenured holding in Buffett's portfolio, and one unlikely to ever be sold, is beverage giant Coca-Cola (NYSE: KO). Owned since 1988, Coca-Cola's beverage products can be found in all but two countries around the world (Cuba and North Korea). The company has done an exceptional job of engaging with consumers and remaining relevant by personalizing marketing campaigns (e.g., the "Share a Coke with [name]" campaign). With a yield on cost of 50.5%, Coke is a money machine for Buffett.
Wells Fargo: 31 years
Money-center bank Wells Fargo (NYSE: WFC) has been a Berkshire Hathaway holding since 1989, although recent aggressive selling activity in the stock suggests this may soon come to an end. Buffett is usually a fan of bank stocks because they're profit generators that can take advantage of long periods of economic expansion. However, Wells Fargo is coming off of an accounting scandal that saw 3.5 million unauthorized accounts opened between 2009 and 2016, which appears to have shaken the Oracle of Omaha's trust in the company. It remains to be seen if Buffett will hang onto the remaining 137.6 million shares.
American Express: 27 years
Financials play a big role in Buffett's portfolio, with payment processor American Express (NYSE: AXP) a continuous holding since 1993. American Express is what we call a double dipper. It not only collects fees by processing payments for merchants, but also acts as an individual and corporate lender, thereby collecting interest on outstanding monthly balances and/or annual cardholder fees. Like most financial stocks, AmEx is vulnerable to recessions. However, it benefits from its close ties with affluent clientele, who help to soften economic ebbs and flows.
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M&T Bank: 24 years
Regional bank M&T Bank (NYSE: MTB) is the only stock on this list to get an asterisk. You see, Berkshire actually invested $40 million into M&T in 1991, following the late 1980s Savings and Loan Crisis, giving Buffett's company a preferred-share stake. However, he didn't convert this preferred stock into common stock until 1996, which is the date I'm going with here. M&T is a fairly conservative regional bank in the Northeast known for using acquisitions to fuel growth. As long as its return on assets (ROA) outpaces the average ROA for regional banks, I don't see Buffett selling his company's stake.
Moody's: 20 years
Berkshire Hathaway's ownership in credit-rating and data analytics company Moody's (NYSE: MCO) traces back to Moody's spin-off from Dun & Bradstreet in 2000. Today, Moody's is one of Buffett's greatest investments, with a cost basis of around $10 a share (Moody's closed at $271.88 on Oct. 23, 2020). The company's analytics segment offers double-digit growth potential, while historically low lending rates should result in plenty of corporate debt issuances for the company to rate.
Costco Wholesale: 20 years
It might be hard to believe, but Warren Buffett has been a Costco Wholesale (NASDAQ: COST) shareholder for two decades. While most forms of retail have been disrupted by the internet, Costco's membership model has been rock-solid. The company uses its size as an advantage to buy in bulk, which effectively keeps prices down for its customers. Costco is also able to lean on its collected membership fees to buffer its margins, undercut other grocers on price, and ensure the loyalty of its shopping base.
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Globe Life: 19 years
Globe Life (NYSE: GL), which was known as Torchmark until August 2019, is the seventh-longest-held stock in Buffett's portfolio. This under-the-radar company provides life and supplement health insurance to low and middle-income households throughout the United States. As is typical of insurance companies, Globe Life has a long history of profitability, and its premium-pricing power ensures that it can handle whatever catastrophic losses may arise.
Procter & Gamble: 15 years
Even though it's one of Buffett's smallest holdings these days, consumer-packaged goods behemoth Procter & Gamble (NYSE: PG) has been a continuous holding since early 2005. The beauty of the Procter & Gamble business model, other than its deep pockets for marketing, is that P&G's portfolio consists of many basic-need products. No matter how poorly the U.S. economy is performing, consumers still need to buy toothpaste, detergent, shampoo, and toilet paper. This provides cash flow predictability that's hard to come by.
Johnson & Johnson: 14 years
Another longtime holding for Berkshire Hathaway is healthcare conglomerate Johnson & Johnson (NYSE: JNJ). Once one of Johnson & Johnson's biggest shareholders, Berkshire owns only 327,100 shares today. Over the past decade, J&J has shifted its revenue generation away from slower-growing consumer health products and toward higher margin pharmaceuticals. With Buffett not a huge fan of tracking clinical trials, nor of J&J's use of its common stock in the acquisition of Synthes in 2012, he significantly pared down Berkshire's stake in the company.
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UPS: 14 years
Logistics company United Parcel Service (NYSE: UPS) actually happens to be Berkshire Hathaway's smallest holding by market value ($10.2 million). Though it's not clear why Buffett continues to hang onto what seems like a token 59,400-share position, UPS looks to be a prime beneficiary of the coronavirus pandemic. As more consumers and businesses shift their activity online, the onus of getting products into the hands of consumers and other businesses is falling on logistics companies. Look for this trend to continue for the foreseeable future.
U.S. Bancorp: 14 years
Lastly, regional banking powerhouse U.S. Bancorp (NYSE: USB) has been a regular holding in Berkshire Hathaway's portfolio since early 2006. Among regional banks, you'd struggle to find a company with a consistently higher ROA during periods of economic expansion than U.S. Bancorp. With more than half of all loan sales now originating from mobile or online transactions, U.S. Bancorp has also been afforded the luxury of closing some of its physical branches to lower its noninterest expenses. I expect this company will remain among Buffett's favorites for years to come.
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Sean Williams owns shares of Wells Fargo. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Moody's. The Motley Fool recommends Costco Wholesale and Johnson & Johnson and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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