2 Warren Buffett Stocks to Buy and Hold Forever

Warren Buffett has made his fortune by investing in “forever” stocks. Take a page from his playbook and buy these top TSX stocks to buy and hold forever.

| More on:
close-up photo of investor Warren Buffett

Image source: The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

Warren Buffett once said, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Although the markets have yet to shut down, it has felt as if many parts of our world and economy have. This year, investors have had to face down a pandemic, an oil price war, the downfall of the economy, and now a dramatic and highly publicized election in the U.S.

Think “forever” like Warren Buffett

Many investors are trying to understand how to properly play the election in the short term. I think investors need to take one of Warren Buffett’s great quotes to heart: “Our favourite stock holding period is forever.”

When you invest, you buy real businesses. Regardless of elections or pandemics, I want to own businesses that are not just operating 10 years from now but still growing and thriving.

Considering Warren Buffett’s buy-and-hold-forever strategy, here are two stocks that I’d take a look at owning.

This railroad stock will be chugging away for a very long time

Warren Buffett has often promoted stocks with solid competitive moats and consistent cash flows. I can’t think of any business with a stronger competitive moat than Canadian Pacific Railway (TSX:CP)(NYSE:CP). There are only two major Canadian railroads, so CP operates purely in a duopoly.

CP faced a number of volume challenges when the pandemic hit. However, it utilized that time to upgrade its network capacity, create more efficient routes, and complete maintenance. As a result, CP is a leaner, more efficient earnings machine than it was previously.

In fact, you can see in the chart below that CP has been able to outperform CN Rail stock by 8.5% year to date. Yet, its price-to-earnings ratio continues to still trade at an 8% discount to CN. This simply demonstrates that much of CP’s stock appreciation has actually been due to true earnings growth as opposed to only multiple expansion.

Warren Buffett: CPR Vs. CNR

CP’s stock is not necessarily cheap today. Yet its transportation infrastructure across Canada is essential to the Canadian economy. It’s hard to imagine a world where we won’t need CP, and that is why it is great Warren Buffett stock to own forever.

This stock has assets that even Warren Buffett would envy

Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) is another stock that might fulfill Warren Buffett’s investing criteria. BIP has the corporate capacity, the financial strength, and the expertise to employ economies of scale across the world. It owns essential infrastructure assets like regulated electric and gas transmission lines, natural gas midstream assets, railroads, toll roads, and data storage/distribution assets.

In typical Warren Buffett fashion, BIP acquires, manages, and transforms distressed infrastructure assets into highly predictable cash cows. In the 2009 financial crisis, BIP acquired a number of utility assets that then fueled +10 years of CAGR FFO per unit growth of 15%!

Today, BIP’s balance sheet is primed with $4.3 billion of dry powder. I believe this sets it up to prosper out of this economic crisis as well. This stock has the resilience and stability of a utility but a better growth profile than many ordinary companies. Combine acquisitions and organic growth, and it could achieve 7-14% annual cash flow growth for many years to come.

While there is nothing exciting about BIP’s portfolio of pipelines and power poles, nobody can complain about the potential for 7-14% annual growth. All this while the stock pays a growing 4.2% dividend! All in all, BIP’s assets should be producing strong cash flow for many years to come, making its portfolio one even Warren Buffett would envy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown owns shares of Brookfield Infrastructure Partners. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends BROOKFIELD INFRA PARTNERS LP UNITS, Brookfield Infrastructure Partners, and Canadian National Railway.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »