3 Warren Buffett Stocks You Can Buy and Hold With Confidence for the Next Decade and Beyond

Renowned investor Warren Buffett has had a long history of outperforming the stock market. Since he took over the position of executive director of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) in 1965, Buffett returned investors nearly 20% annually, enough to turn a $100 investment into $4.4 million today.

Buffett’s long-term success is attributed to several factors, a key one being that Berkshire invests in high-quality companies with robust economic moats and excellent cash flows. Here are three Buffett stocks you can buy and hold with confidence for the next decade.

1. Chubb

Insurance companies’ cash flows make them attractive investments, which is why Buffett has invested in them for decades. Insurance companies can make attractive investments because their products are always in demand and premiums can rise with economic growth and inflation, making them excellent cash flow machines.

Not every insurer will, however. As one of the world’s largest property and casualty insurance companies, Chubb (NYSE: CB) demonstrated excellent risk management compared to its peers. Chubb is a prudent underwriter and has done an excellent job of balancing claims costs and expenses with premiums collected, consistently beating industry peers.

Last year, Chubb generated $15.1 billion in free cash flow, which it can use to pay dividends, buy back stock or invest in bonds and stocks. Its excellent cash flow and strong competitive moat are why it has increased its dividend payout for 31 consecutive years.

Chubb has built up its knowledge over decades of underwriting and understanding the risks and rewards of making it difficult for new entrants to take market share. The company is positioned to grow with the economy. It can also provide a hedge against the possibility of rising inflation and interest rates, making it a great stock to hold for the next decade and beyond.

2. American Express

When CEO Stephen Squeri took over the lead role at American Express (NYSE: AXP) in 2018, Warren Buffett told him that the company’s brand was “the most important thing about American Express.” What makes American Express stand out is its attractive offers that appeal to high-spending consumers and its customers’ long-standing brand loyalty.

It turns out that the famous American Express black card requires annual spending of up to $500,000 just to get an invite. Its Platinum card, with an annual fee of $695, appeals to big spenders and offers benefits from luxury travel providers, luxury hotels, airlines and clothing lines.

The story continues

American Express is a high-end brand that charges higher processing fees than its peers. While some retailers don’t take the card, it’s worth it for American Express users who enjoy valuable rewards.

The company also owns credit card loans, earning interest income and has benefited from the rising interest rate environment. Last year, net interest income rose 33% and rose another 20% in the first half of this year. Although holding these loans exposes it to credit risk, American Express’ top customers should continue to spend more than others amid inflation or economic slowdowns.

3. Moody’s

Moody’s Corporation (NYSE: MCO) operates a credit rating business and enjoys a robust economic moat. This is because breaking into the credit rating industry is difficult due to high barriers to entry, as it takes time to build a reputation as a trusted resource for assessing the creditworthiness of companies and debt instruments.

The regulations also make it harder for new entrants to oust long-time incumbents. Moody’s is the second largest credit rating company in the US with a 32% market share. Only S&P Globalwith a 50% market share, it is higher.

Moody’s has struggled in recent years due to low volumes of debt issuance. However, its robust analytics business helped prop up its earnings during a downturn in its ratings business.

The good news for investors is that issuance volumes have started to pick up a lot. In the first six months of this year, Moody’s Investor Services (where it represents its rating business) adjusted operating income rose 51% year over year.

With a robust economic moat, the company is well positioned to benefit from pent-up demand for debt issuance and should continue to be a key player in the capital markets for years to come.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Moody’s and S&P Global. The Motley Fool has a disclosure policy.

3 Warren Buffett Stocks You Can Buy and Hold With Confidence for the Next Decade and Beyond was originally published by The Motley Fool