3 Top Buffett Stocks to Buy and Hold for the Long Term

Warren Buffett, often referred to as the “Oracle of Omaha,” has been one of the most renowned stock pickers in the world for decades. As Chairman and CEO of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B)he has consistently demonstrated an uncanny ability to identify long-term winners in the stock market. So when Buffett buys a stock – or decides to hold on to a stock that others are selling – investors should pay attention.

Buying and holding for the long term has always been at the core of Buffett’s investment philosophy. Berkshire’s recent filings with the Securities and Exchange Commission (SEC) show that despite his recent habit of selling more than buying, Buffett still believes some stocks are worth buying and holding.

Here are three top Buffett stocks to buy and hold for the long term.

1. Heico: A long-term outperformer

Buffett recently purchased another 5,445 shares of Heico (HEY 0.71%). This low-cost aircraft parts supplier has consistently outperformed the market for more than a decade.

Like all types of replacement parts (e.g. components for a car engine or charging cables for a smartphone), original equipment manufacturer (OEM) replacement parts are typically significantly more expensive than identical non-OEM or “off-brand” manufacturers. As the world’s largest supplier of non-OEM aircraft parts, Heico manufactures some parts in-house and sources others from third-party suppliers.

Given the limited number of aircraft manufacturers in the world – and recent delivery delays at two of the world’s largest – Boeing And airbus – Wait times for new aircraft appear to be getting longer, leading to higher demand for parts needed to maintain existing fleets.

Heico’s excellent reputation for offering high quality parts at affordable prices gives the company a built-in competitive advantage over potential new entrants to the industry. After all, would you buy inexpensive parts for an airplane from a supplier you knew nothing about? Buffett clearly believes the company will continue to outperform. He’s also likely a fan of the company’s consistent dividend increases (although the huge increases in the stock price have kept the yield minimal, a small price to pay for Heico’s huge returns).

2. Sirius XM Radio: A run-down ATM

Radio? Really? In this world of podcasts, audiobooks and music streaming, does anyone even listen to the radio anymore?

Surprisingly, yes. In the last quarter SiriusXM (SIRI 1.57%) The company has approximately 33 million subscribers to its satellite radio service. However, this number includes both “paid advertising” subscribers (such as automakers that offer a free year of satellite radio with the purchase of a new car, or rental car agencies that offer satellite radio for their entire fleet) and the more traditional “self-pay” subscribers. While the company gained 14,000 self-pay subscribers, it lost 114,000 paid advertising subscribers as automakers cut costs by shortening or slashing their paid advertising terms.

At first glance, the numbers from Sirius’ last quarter might seem like why would Buffett decide in October to buy another 3.6 million shares of the company for $87 million, increasing Berkshire’s total stake to 32%?

Maybe it’s because Sirius XM is a money-generating machine. Even after a decline in subscribers and ARPU, the company still has a gross margin of 60% and expects free cash flow of $1 billion for the year, more than enough to fund its generous dividend, which is currently $3. is 9%. Despite this financial strength, the company’s valuations are at their lowest levels in 15 years, with a price-to-earnings ratio of less than 8 and a price-to-sales ratio of just 1.2.

Buffett loves a bargain, and Sirius XM Radio certainly looks the part these days.

3. Amazon: No end in sight

While it’s useful to look at what Buffett is buying, it’s also important to look at what he’s not selling. He made headlines for reducing his (massive) stake Applebut its other big tech holding – 10 million shares of Amazon (AMZN 2.21%) — still lies there untouched.

It’s not hard to understand why. Amazon’s stock is at an all-time high, as are its revenue ($620 billion last year) and net income ($49.9 billion last year). So despite a market capitalization of more than $2.2 trillion, the price-to-earnings ratio of 45 is close to an all-time low. Given the company’s dominance in e-commerce and its lucrative cloud platform Amazon Web Services, this choice will likely continue to pay off for Buffett going forward.

Buy like Buffett

Heico, Sirius And I should know because I have owned shares in all three of these companies for more than a decade and have no plans to sell any of them any time soon. I believe in Buffett’s investing philosophy (which is also Foolish’s philosophy): good companies are worth holding on to.