2 Warren Buffett Stocks You Can Buy and Hold for Decades

Warren Buffett needs no introduction. The 94-year-old is considered one of the greatest investors of all time after building his company. Berkshire Hathaway the sixth largest publicly traded company in the world.

There is a $300 billion-plus stock portfolio in Berkshire that the Oracle of Omaha, with the help of his lieutenant investors, built from scratch over decades. Buffett has been successful in picking large and small stocks from a wide range of industries. Here are two Warren Buffett stocks you can buy and hold for decades.

American Express: 12.1% of the portfolio

Berkshire’s second-largest holding, behind the consumer tech giant Appleis the major credit card and payment company American Express (AXP 1.51%). Buffett has a history with AmEx. He acquired his first share in the 1960s amid a bit of a crisis for the company at the time. But in 1991, when credit cards were all the rage, Berkshire bought $300 million in AmEx stock, the start of many other sizeable acquisitions over the next several decades. Today, Berkshire’s stake in AmEx is worth more than $36.8 billion. The stock has also doubled in the last five years.

Investors can still comfortably buy and hold American Express for a few reasons. AmEx has developed the kind of brand that most companies are envious of, similar to how Apple has with products like the iPhone. While AmEx cards have a lot of great product features, one of the main reasons people have them is because the brand represents a certain kind of status. Having an AmEx card means something, whether it’s a sign of wealth, financial freedom, or access to the perks that come with an AmEx membership. This is a huge strength because it allows AmEx to attract a lot of higher-income, affluent customers with credit profiles that hold up better during a recession.

In addition, AmEx is unique in that it operates a massive payment network, similar to Visa and MasterCardalthough not quite as big. This business earns tens of billions of dollars in fees each year from facilitating transactions between the company’s card members and merchants.

In fact, payments revenue accounted for more than half of the company’s total revenue in the first six months of the year. These payment businesses are more capital efficient and tend to earn higher multiples than a credit card business because they are difficult to replicate and therefore scale.

Bank of America: 11.2% of the portfolio

Buffett and Berkshire invested for the first time Bank of America (BAC -0.34%)the second largest US bank by assets in 2007 amid the global financial crisis. Buffett’s first encounter with the company was less than stellar, as Berkshire bought shares while Bank of America was trading in the $40s and $50s and sold about a year later at heavy losses.

But in 2011, Buffett tried again. The story goes that Buffett called CEO Brian Moynihan, who still runs the bank today, and offered to invest capital. Moynihan insisted that Bank of America did not need capital, but Buffett convinced him to take it anyway, suggesting that it would provide stability after several very chaotic years in the banking industry. Berkshire would inject $5 billion of equity into Bank of America in exchange for $5 billion of preferred stock paying a 5 percent dividend. Berkshire also received warrants, allowing the conglomerate to purchase 700 million shares at an exercise price of $7.14 per share at any time over the next decade. It was one of the best deals Buffett ever made.

Buffett has been selling the stock lately. Since mid-July, Berkshire has unloaded nearly $7 billion of its stake in the company at an average price of $41.08. But given that he’s been buying stocks since 2017, mostly in the $20s, it’s clear that Buffett has done pretty well with his investment. Also note that Buffett and Berkshire have a much different mindset than retail investors because they held such a large position in the bank and hold such a massive stock portfolio.

Moynihan did a great job turning Bank of America around and turning it into the behemoth it is today. Bank of America has arguably the best consumer deposit base in the world, and the bank has also built its investment banking and wealth/asset management businesses into behemoths that now compete with the most the best of the best. While the bank could have done a better job of managing its balance sheet in recent years — the company has billions in unrealized securities losses — the strength and granularity of Bank of America’s deposit base ensures that it would be nearly impossible for the bank to face a significant number of deposits and sell bonds at a loss.

The deposit base also gives Bank of America a smaller funding base that can be deployed in loans and securities and earn a healthy spread. As the yield curve finally flattens out and may begin to slope in the coming months as interest rates decline, Bank of America is well positioned to profit.