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

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

Long-term buying and holding have always been the core of Buffett's investing philosophy. Berkshire's latest Securities and Exchange Commission (SEC) filings show that despite his recent habit of selling more than he's buying, Buffett still thinks 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 bought an additional 5,445 shares of Heico (NYSE: HEI). This discount aircraft parts supplier has consistently outperformed the market for more than a decade.

Just like any type of replacement parts (for instance, components for a car engine or charging cables for a smartphone), those from the original equipment manufacturer (OEM) are usually much 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 itself and sources others from third-party suppliers.

Given the limited number of aircraft manufacturers in the world -- and recent delivery slowdowns at two of the world's largest, Boeing and Airbus -- wait times for new aircraft seem only to be getting longer, resulting in higher demand for the parts needed to keep existing fleets in service.

Heico's stellar reputation for providing quality parts at affordable prices gives it a built-in competitive moat against any potential newcomer to the industry. After all, would you buy cut-rate parts from a provider you knew nothing about for an airplane, of all things? Buffett clearly expects the company to continue to outperform. He's probably also a fan of the company's consistent dividend increases (although the huge increases in share price have kept the yield minimal, a small price to pay for Heico's massive returns).

2. Sirius XM Radio: A beaten-down cash machine

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

Surprisingly, yes. In its most recent quarter, Sirius XM (NASDAQ: SIRI) boasted about 33 million subscribers to its satellite radio service. However, that number includes both "paid promotional" subscribers (like automakers that include a free year of satellite radio with a new car purchase or rental car agencies that offer satellite radio for their entire fleet) and the more traditional "self-pay" subscribers. While the company added 14,000 self-pay subscribers, it lost 114,000 paid promotional subscribers as automakers cut costs by shortening or cutting their paid promotional terms.

At first, the numbers from Sirius XM's latest quarter might sound pretty dismal: Revenue declined by 5% year over year to $1.6 billion, average revenue per user (ARPU) dropped 3.4% to $15.16, and gross profit sagged 7% to $969 million. So, why would Buffett decide in October to purchase another 3.6 million shares of the company for $87 million, upping Berkshire's total stake to 32%?

Perhaps it's because Sirius XM is a cash-generating machine. Even after its subscriber and ARPU declines, the company still boasts a gross margin of 60% and expects to churn out $1 billion in free cash flow for the year, more than enough to fund its generous dividend, which currently yields 3.9%. Despite this financial strength, the company's valuations are at 15-year lows 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 sure looks like one today.

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 isn't selling. He's made headlines for trimming his (massive) stake in Apple, but his other big tech holding -- 10 million shares of Amazon (NASDAQ: AMZN) -- is still sitting there untouched.

It's not hard to see why. Amazon's stock is at an all-time high, as are its revenue ($620 billion over the past year) and net income ($49.9 billion over the past year). So, despite having a market capitalization of more than $2.2 trillion, its price-to-earnings ratio of 45 is near an all-time low. Given the company's e-commerce dominance and its lucrative Amazon Web Services cloud platform, this pick is likely to continue to pay off for Buffett well into the future.

Buy like Buffett

Heico, Sirius XM, and Amazon all look like great stocks to hold for the long haul, with proven business models and solid financials. And I should know because I've owned shares of all three of these companies for more than a decade, and don't plan to sell any of them anytime soon. I believe in the Buffett investing philosophy (which is also the Foolish philosophy): Good businesses are worth holding on to.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Bromels has positions in Amazon, Apple, Berkshire Hathaway, Heico, and Sirius XM. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool recommends Heico. The Motley Fool has a disclosure policy.