Title: Top 3 Warren Buffet-Loved Stocks to Stash Away for the Long Term
Warren Buffett, often known as the "Oracle of Omaha," has been one of the globe's most renowned stock pickers for decades. Serving as the chairman and CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), he's consistently demonstrated an uncanny ability to spot long-term winners in the stock market. When Buffett invests in a stock or decides to hold onto one, investors would be wise to take notice.
Long-term investing and holding has always been the cornerstone of Buffett's investment philosophy. Berkshire's SEC filings reveal that, despite his recent tendency to sell more than he buys, Buffett still believes in the worth of some stocks and is willing to invest in them.
Three top Buffett stocks to consider buying and holding for the long term are:
1. Heico: A consistent performer
Buffett recently acquired 5,445 additional shares of Heico (HEI -0.80%). This discount aircraft parts provider has consistently outperformed the market for more than a decade.
Just like replacement parts for cars or smartphones, parts from original equipment manufacturers (OEMs) are usually more expensive than non-OEM or third-party alternatives. Heico, being the world's largest supplier of non-OEM aircraft parts, manufactures some parts itself and sources others from third-party suppliers.
With a reduced number of aircraft manufacturers and delivery slowdowns at two of the world's largest, Boeing and Airbus, wait times for new aircraft appear to only be getting longer. This increased demand for parts needed to maintain existing fleets benefits Heico, which has built a strong reputation for providing quality parts at affordable prices. This competitive advantage helps Heico fend off potential newcomers to the industry. Buffett likely expects the company to continue to outperform, and he is a fan of its consistent dividend increases—although the substantial price gains have kept the yield minimal.
2. Sirius XM Radio: A neglected gem
Is radio still relevant in this era of podcasts, audiobooks, and streaming music? Surprisingly, yes. According to Sirius XM's most recent quarterly report, it had over 33 million subscribers to its satellite radio service, although this number includes both promotional and self-pay subscribers.
The company added 14,000 self-pay subscribers but lost 114,000 promotional subscribers due to automakers cutting expenses by reducing or eliminating promotional terms. Despite subscriber and ARPU declines, Sirius XM still boasts a gross margin of 60% and expects to generate $1 billion in free cash flow for the year, enough to cover its generous dividend, currently yielding 3.9%.
Despite being a cash-generating machine, Sirius XM's valuations are at all-time lows, with a price-to-earnings ratio of less than 8 and a price-to-sales ratio of just 1.2. Buffett loves a good deal, and Sirius XM Radio seems to be one today.
3. Amazon: An enduring champion
While it's helpful to focus on what Buffett is buying, it's equally crucial to pay attention to what he's not selling. He's downsized his massive stake in Apple, but his other significant tech holding—10 million shares of Amazon (AMZN -1.44%)—remains unchanged.
It's not hard to see why. Amazon's stock is at all-time highs, as are its revenue ($620 billion over the past year) and net income ($49.9 billion over the past year). With a market cap of over $2.2 trillion, its price-to-earnings ratio of 45 is near a historical low. Given the company's e-commerce dominance and lucrative AWS cloud platform, this investment is likely to continue paying off for Buffett well into the future.
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Buffett's investment in Heico shows his commitment to long-term finance, as he purchased more shares of the discount aircraft parts provider, which has consistently outperformed the market. This investment aligns with his belief in the worth of certain stocks, even in the face of his recent trend of selling more than buying.
Investors looking to follow Buffett's lead could consider Sirius XM Radio, which Buffett might see as a neglected gem. Despite a decline in subscribers and ARPU, the company's strong gross margin and expected free cash flow make it an attractive option, especially given its low valuations.
