Berkshire Hathaway's (BRK.A -0.76%) (BRK.B -0.69%) CEO, Warren Buffett, undoubtedly has a keen eye for value. Berkshire's book value per share, which is often used as a proxy for the diversified holding company's intrinsic value, increased at a blistering compound annual growth rate of 18.7% over the period from 1965 to 2021.
And as a direct result of Buffett's laser-like focus on owning large chunks of companies with deep value, Berkshire's stock delivered a whopping 3,641,613% total return on capital for shareholders from 1964 to 2021. Buffett, in short, is the undisputed of king of bargain hunting.
Which Berkshire holdings are the most compelling bargains right now? I think the e-commerce titan Amazon (AMZN 3.43%) is easily Buffett's most undervalued stock holding right now. Here's why.
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Pandemic headwinds have hurt the tech giant's core business
E-commerce behemoth Amazon lost roughly a third of its value over the prior 12 months. Amazon's stock has been under heavy pressure of late due to the company's decision to bulk up in order to meet the surge in demand during the early days of the pandemic.
As consumers have steadily migrated back to shopping at brick-and-mortar stores, however, Amazon has been forced to resize its bloated e-retailer operation. The net result of this miscue is that Amazon posted its first net loss in seven years in the first quarter of 2022.
The sluggish performance of Amazon's core business segment, though, has arguably been overplayed by bears. After all, the company is still seeing healthy levels of revenue growth in other key segments like its advertising unit, cloud-computing division, and subscription-based services. Keeping with this theme, Amazon is expected to return to high double-digit revenue growth as soon as next year.
Amazon's healthcare unit is grossly underappreciated
The real reason to hoard Amazon's stock at these levels, though, has yet to even make a debut on most analysts' reports. The long and short of it is Amazon's steady move into the massive $800 billion U.S. healthcare sector has the potential to be a major catalyst for the company's share price within a few short years.
In 2018, Amazon kicked its plan to disrupt the embattled U.S. healthcare space into high gear through its acquisition of the online pharmacy PillPack. Since then, the company has developed a telemedicine program known as Amazon Care. Its fledgling telemedicine venture has recently received additional support through a partnership with Teladoc Health aimed at providing access to healthcare via Alexa-enabled devices. Amazon's nearly $4 billion acquisition of 1Life Healthcare, also known as One Medical, earlier this month will also extend its virtual and in-person primary healthcare capabilities once the deal closes later this year.
The bottom line is that Amazon's best-in-class logistics platform, integrated digital ecosystem, unprecedented access to consumer data, and vast financial resources put it in an ideal position to revolutionize healthcare in the United States. Now, the market clearly hasn't put much stock into this possibility -- evinced by Amazon's shares trading at a meager two times 2023 projected sales right now. Savvy investors, though, will definitely want to consider the enormous growth prospects of Amazon's steady march into healthcare.
