Warren Buffett’s investment powerhouse, Berkshire Hathaway, commands attention for its meticulously curated portfolio. With premier holdings like Apple, American Express, and Bank of America, the Oracle of Omaha’s seal of approval has long been synonymous with investment success. Berkshire Hathaway’s own stock has consistently outperformed the S&P 500 index for over six remarkable decades.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Delving into Berkshire’s newer investments like Chubb and Ulta Beauty, as well as the more established position in Amazon, offers tantalizing prospects. Warren Buffett’s foray into Amazon in 2019, culminating in a $1.87 billion stake, now constituting 0.6% of Berkshire’s portfolio, sheds light on the e-commerce behemoth’s potential upward trajectory in the coming years.
The Dynamics Driving Amazon’s Growth
Amazon’s revenue pours in from its expansive online marketplaces, yet its profitability thrives on Amazon Web Services (AWS), a dominant force in the cloud infrastructure realm. AWS operates at elevated margins, subsidizing the growth of Amazon’s core e-commerce business and burgeoning advertising segment, thus fortifying its competitive position.
The strategic allure of Amazon lies in its membership of over 200 million Prime subscribers worldwide, a formidable ecosystem that erects barriers against competitors, both online and offline.
Decoding Amazon’s Unconventional Position in Berkshire’s Portfolio
Warren Buffett traditionally favors companies with robust gross and net profit margins, a criterion that Amazon does not squarely meet. However, Amazon’s oligopoly in e-commerce and cloud infrastructure confers a wide competitive moat. In 2023, Amazon’s North American retail segment’s net sales surpassed $353 billion, towering over Walmart’s $100 billion e-commerce sales in fiscal 2024.
As the cloud computing dominator with a 33% market share, AWS retains a commanding lead in a market poised for exponential growth, fueled by the uptick in AI applications necessitating enhanced cloud capabilities.
Projections for Amazon’s Trajectory beyond 2025
Analysts project Amazon’s revenue to surge at an 11% compound annual growth rate (CAGR) from 2023 to 2026, with earnings per share (EPS) set to soar at a 36% CAGR. At a forward multiple of 32 times next year’s earnings, Amazon’s stock appears attractively valued, potentially heralding a 25% rise to around $234 by the end of 2025. A loftier multiple of 50 times forward earnings could propel the stock close to doubling, reaching about $365.
Seizing the Second Opportunity with Amazon
Ever thought you missed the boat on investing in top-performing stocks? Not so fast.
Occasionally, our team of experts issues a “Double Down” stock recommendation, identifying companies on the brink of a major upsurge. Act now to seize the opportunity before it vanishes. The proof is in the pudding:
- Amazon: If you invested $1,000 in our “Double Down” call in 2010, you’d have $20,363!*
- Apple: A $1,000 investment in 2008 would yield $41,938!*
- Netflix: Joining our strategy in 2004 with $1,000 would now accumulate $378,539!*
Presently, we’re lighting up the radar with “Double Down” alerts for three exceptional companies. The moment is now—don’t let this opportunity slip away.
*Stock Advisor returns as of October 7, 2024