Born in Omaha, Nebraska, in 1930, Warren Buffett is widely considered to be one of history's best investors. If you were fortunate enough to hold a $100 stake in Berkshire Hathaway (BRK.A -0.64%) (BRK.B -0.81%) back when Buffett assumed control of the company in 1965, that position would now be worth more than $2.25 million now.
With that kind of incredible, market-crushing performance, it's little wonder he's sometimes referred to as "the Oracle of Omaha." If you're interested in taking a page out of his playbook, read on for a look at three Buffett-backed stocks that are worth buying today.
Amazon (AMZN 0.64%) spearheaded the growth of the e-commerce industry, and the company remains a top player in the space. While the online retail industry has historically been low margin, advancements in automation and robotics have the potential to make the business much more profitable. Amazon has scale and infrastructure advantages in the category that give it a powerful moat, and its e-commerce business has the potential to evolve into a much bigger earnings driver. No company in the e-commerce or overall retail space is better positioned to take advantage of automation than Amazon.
As impressive as its online retail segment is, the company's cloud infrastructure business actually accounts for the large majority of its profits. Amazon Web Services (AWS) is the world's largest cloud infrastructure services network, and it's contributed roughly $12.2 billion in operating income in the first half of the year. Meanwhile, Amazon's e-commerce-centric segments actually combined for an operating loss of roughly $5.2 billion in the period due to rising operating costs and large infrastructure investments.AWS grew sales roughly 33% year over year last quarter, and with the segment coming to account for a larger portion of total revenue, it should boost the company's overall profitability over the long term.
At roughly 0.4% of Berkshire's total stock portfolio, the tech giant accounts for a small portion of the investment conglomerate's holdings, but Buffett went so far as to describe himself as an "idiot" for not getting in earlier after finally buying shares in the first quarter of 2019. Even though Amazon stock is down roughly 38% from its peak valuation, Berkshire has still made substantial gains on its investment.
Amazon is a business with incredibly strong competitive positioning and promising avenues to growth despite its already massive size, and the stock looks primed to be a winner for shareholders who take a buy-and-hold approach.
Buffett once called Apple (AAPL 0.68%) the best business he knew of in the world, and Berkshire's massive investment in the tech company makes it clear he has high conviction in that assessment. Apple is the largest position in the Berkshire portfolio and currently accounts for nearly 40% of its total stock holdings.
The tech giant absolutely dominates the mobile hardware space. The iPhone recently surpassed 50% market share in the U.S., giving Apple market leadership in the category despite competing against a wide array of (often less expensive) devices from manufacturers using Alphabet's Android operating system. While the company's market share is lower in the global mobile market, Apple still dominates when it comes to worldwide mobile hardware profits.
Even better, dominance in the mobile space has helped lay the foundations for the company's enormously profitable software and services business, and users of Apple devices spend far more on app purchases and subscriptions than those on Android-based counterparts. Apple's brand strength and all-encompassing hardware and services ecosystem create powerful competitive advantages and will likely help the company continue to serve up market-beating returns for long-term shareholders.
3. Berkshire Hathaway
If you want to invest like the Oracle of Omaha, buying Berkshire Hathaway stock might be the single best way to do it. Led by Buffett, co-chairman Charlie Munger, and teams of top analysts, Berkshire Hathaway has crushed the market for decades, and owning the stock gives you a piece of the famously successful conglomerate.
In addition to its portfolio of stock holdings, investing in Berkshire also gives you exposure to its fully owned subsidiaries. The company owns massive railway, insurance, and energy businesses, and it also has big names including GEICO insurance, Duracell batteries, and Dairy Queen restaurants under its corporate umbrella.
In recent years, Buffett and the management team at Berkshire Hathaway have spent more money buying back the company's own shares than investing in any other stock. The big buyback push likely signified that management believed the stock to be undervalued, and it's also had the effect of boosting earnings per share by reducing the total number of shares outstanding. Even after buying back more than $62 billion worth of its own stock over the last four years, Berkshire held $105.4 billion in cash at the end of the second quarter, and it could use recent market turbulence to invest in beaten-down companies or make new acquisitions.
Berkshire Hathaway is a fantastically managed company with a strong foundation, and the stock stands out as a relatively low-risk investment capable of delivering market-beating returns.