Warren Buffett is known for saying his favorite holding period is "forever." But if you follow Berkshire Hathaway's trading activity, you'll notice that it sells stocks quite often, whether partial or full positions. In fact, it's been a net seller of stocks for the past nine quarters, a rarity for the holding company.
Throughout this time, there are two stocks (among others) he hasn't touched that he has said several times he would never sell: Coca-Cola(NYSE: KO) and American Express(NYSE: AXP).
When Buffett said that his favorite holding period is forever, he was actually talking about Coca-Cola. In the 1988 shareholder letter, he said that Berkshire Hathaway had bought Coca-Cola stock and Federal Home Loan Mortgage Corporation (aka Freddie Mac loans) and that he expected to "hold them for a long time." Even more, he said, "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Here's how he explained his reasoning in more detail, quoting an investing legend from Fidelity: "We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds."
Let's see why they could be excellent forever stocks for you, too.
1. Coca-Cola: The beverage industry giant
Coca-Cola is the largest beverage company in the world, with $47 billion in trailing-12-month revenue. It owns about 200 brands -- some well known, like Minute Maid juices and Fairlife milk -- and some smaller local brands. But its namesake brands are the cash cows that drive sales and maintain its dominance in the industry.
Most companies as large and as old as Coca-Cola (it's been around since 1886) grow slowly, and Coke is no exception. However, it's been making somewhat of a comeback and reporting robust sales and increasing earnings.
Revenue was up 3% year over year in 2024, and organic revenue, which strips out the impact of acquisitions and other changing features, was up 12%. Comparable operating income was up 16%.
That's strong performance under challenging circumstances, and it speaks to the company's excellent management, healthy operating model, and powerful brand. Under almost any circumstances, people love and drink its products.
Management also continues to innovate to keep its dominant position, experimenting with flavors and packaging to meet consumer demand. Its new smaller bottles have been a hit, since they cost less, and even customers under budget pressure can continue to enjoy their favorite drinks.
Lastly, Coke is a Dividend King, having raised its dividend annually for the past 63 years. It yields 2.8% at the current price, which is slightly low for the company because its stock is beating the market right now, up 14% year to date. Coca-Cola is a secure stock that's reliable for growing passive income at all times.
2. American Express: The niche resilient clientele
Buffett often groups Coca-Cola and American Express together, and they have many features in common.
He has praised their global brands that "travel" and their long-term roles in the American growth story. They have products people always need, and they're both quite old -- American Express got started in 1850.
They're the two longest-held stocks in the Berkshire Hathaway portfolio, and Buffett expects to hold them forever. And they both pay a dividend; American Express' dividend yields 1% at the current share price.
The company operates one of the three largest credit networks in the world, but it's different than Visa and Mastercard because it has a closed-loop system, which means that it operates without outside partnering creditors. It has its own banking system to provide the credit, and it also functions as a full bank, with many financial services and a robust small-business segment.
Management targets an affluent, resilient clientele that spends more than average and is less likely to default on debt, driving growth even when there's inflation and economic volatility. Revenue increased 10% year over year in the 2024 fourth quarter, and earnings per share (EPS) were up 16%.
It had record cardmember spending in 2024 and record card fees. The annual fee is an important part of the model, breeding loyalty and exclusivity as well as recurring revenue. Net fees increased 18% year over year in the fourth quarter and accounted for close to 13% of total revenue.
The company is attracting new members from younger age groups and expects that to drive growth for many years. Management is guiding for revenue and EPS to each increase about 9% this year, and investors can expect it to keep growing for years, paying dividends and growing in share price.
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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.
