When Warren Buffett took over as Berkshire Hathaway's (BRK.A -0.30%) (BRK.B -0.26%) CEO in 1965, Lyndon Johnson was the U.S. president and The Sound of Music had just been released two months prior. The company was valued at just $19 per share when Buffett purchased a controlling stake in the textile producer that would be the foundation and namesake for what would go on to become a legendary investing conglomerate. Today, the company's class A shares trade at roughly $439,400 apiece -- good for growth of more than 2,310,000%.
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Buffett's incredible financial acumen and prescience have earned him the nickname "the Oracle of Omaha," and it's little wonder that people around the globe look to the famous investor for stock picking and money management advice. With the Oracle's incredible track record in mind, read on for a look at two Buffett-backed stocks that are worth buying and holding for the long term.
1. Amazon
At a surface level, Amazon (AMZN -1.65%) doesn't look like a typical Buffett stock. The e-commerce and cloud computing industries are tech-heavy and enormously complex, and it's fair to say the same about many of Amazon's emerging growth bets too. The company also trades at roughly 82.5 times this year's expected earnings and has never looked like the traditional "value stock" most associated with Buffett -- at least by most metrics.
However, if you look at other characteristics prized by Buffett in his stock-picking forays, it's much easier to understand why the tech giant has earned a position in the Berkshire portfolio. For one, Amazon's core businesses have fantastic moats. The company's technology and infrastructure advantages in the online retail and cloud services spaces point to the company enjoying strong growth in both of these categories for decades to come, and its leading positions in these industries strengthen other aspects of the business as well.
Innovation isn't easy, and there's a strong case that no business has a better track record of debuting influential services and technologies over the last two decades. Amazon's management and execution have been consistently phenomenal, and its forefront positions in e-commerce and cloud computing have created foundations that should help it score big wins in digital advertising, artificial intelligence, robotics, and other promising growth trends.
With Amazon being somewhat atypical for the Berkshire model and occupying a relatively small position in the investment conglomerate's portfolio, it's not surprising that it doesn't get much attention as a Buffett stock. However, the tech giant runs a fantastic business, and it looks spectacularly well-positioned to win in the future.
2. Berkshire Hathaway
Warren Buffett may be best known for buying and holding winning stocks, but Berkshire Hathaway has actually been a net seller of stocks for the last four quarters. Through the company's earnings, incoming dividend payments, and sizable stock sales, the investment conglomerate ended its third quarter with a record $149 billion in cash. Despite reducing its overall position in equities over the last year, Berkshire Hathaway has been particularly aggressive in buying one stock: Its own.
Buying back shares reduces the company's outstanding share count, thereby also increasing earnings per share for investors, but there's another important takeaway. The big buyback initiative signals that the Berkshire team is generally having a harder time finding other great deals on the market.
Warren Buffett, vice chairman Charlie Munger, and the Berkshire analysts have historically been adept at identifying great opportunities, and the combination of the company's increasing cash pile and its big share repurchasing push is sending a notable message to investors. Outside of its own stock and a handful of other names, the team isn't seeing many screaming buys right now.
With the market in a volatile state and uncertainty on the horizon, Berkshire Hathaway stock looks like a great all-around buy. In addition to Amazon, buying Berkshire Hathaway stock will give you exposure to a diversified selection of industry-leading companies including Apple, Coca-Cola, Bank of America, and American Express. And when Buffett gets more aggressive in putting that massive $149 billion cash pile to use, shareholders should enjoy the benefit of having one of history's greatest investors on their side.
