In the early 1960s, Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.01%) was a struggling textiles company based out of New Bedford, Massachusetts. At the time, it would have been almost unthinkable to suggest that it would eventually go on to be one of the largest and most successful companies in history.
Current CEO Warren Buffett began investing in the company in 1962 through his investment partnership. He eventually purchased a controlling stake in the business in 1965 and became its chief executive. While today's Berkshire Hathaway bears little resemblance to the textile business of old, the acquisition would prove to be the foundation upon which one of history's best-performing investment conglomerates was built.
Through his tenure as Berkshire's CEO, the Oracle of Omaha has guided the company to market-crushing returns and delivered life-changing returns for long-term shareholders. With that world-beating performance in mind, read on for a look at two Buffett-backed stocks that are worth buying and owning for the long haul.
Image source: The Motley Fool.
1. Amazon
Much of Berkshire Hathaway's incredible success can be attributed to Buffett being "fearful when others are greedy and greedy when others are fearful." Right now, there certainly appears to be plenty of fear surrounding Amazon (AMZN 1.30%) stock. The company's share price trades down roughly 39% over the last year and is approximately 50% off from its peak.
Rising fuel, shipping, and employee costs led to increased expenses for the company's e-commerce business, and this trend of rising costs also occurred at a time when sales growth was weak due to headwinds, including the evaporation of pandemic-driven demand. Amazon Web Services (AWS), the company's profit-driving cloud-infrastructure business, also saw margins dip due to higher energy and labor costs and revenue growth decelerate in conjunction with macroeconomic pressures.
But while valuation pullbacks for the stock aren't entirely unjustified, the fear surrounding the company's outlook also created a worthwhile buying opportunity for long-term investors.
AMZN PS Ratio (Forward) data by YCharts
With the company currently valued at roughly 1.7 times this year's expected sales, the market seems to underestimate Amazon's ability to return to stronger sales growth and margins. Between its industry-leading positions in e-commerce and cloud services, strong growth for its digital advertising business, and demonstrated penchant for innovation, there should be little doubt that Amazon remains a great business. The company is strong enough to make it through the current batch of macroeconomic pressures, and there's a very good chance that its share price will bounce back and go on to hit fresh highs.
While Amazon stock accounts for a relatively small portion of Berkshire Hathaway's total equity portfolio, I think it stands out as one of the investment conglomerate's most attractively valued stock holdings and offers the best risk-reward profile for growth-oriented investors seeking market-crushing gains.
2. Berkshire Hathaway
If you're looking to invest like Warren Buffett, why not let the Oracle of Omaha do some of the heavy lifting for you? Owning Berkshire Hathaway stock is like having Buffett, co-chairman Charlie Munger, and the company's portfolio managers and analyst teams working to get returns on the money you've invested.
Under Buffett's guidance, Berkshire has a tremendous history of market-crushing performance, and the investment conglomerate remains one of the best-managed companies in the world.
BRK.A Total Return Level data by YCharts
For a recent example of Berkshire's savvy investment approach leading to market-beating success, just look to the company's well-timed decisions to pile into energy companies including Chevron and Occidental Petroleum. Spurred by soaring energy costs, these companies delivered incredible gains in 2022, with Chevron's total return of 58.5% making it last year's best-performing Dow Jones Industrial Average index component and Occidental Petroleum stock climbing roughly 119%.
These positions helped Berkshire absolutely crush the broader market last year, with the company's stock price climbing 4% across the stretch while the S&P 500 index recorded a dividend-adjusted total return of negative 18%. The performance marked the best performance for Buffett's company against the index since 2007.
If you're looking for judicious portfolio management and masterful balancing of risk-reward dynamics, Berkshire Hathaway's track record is nothing short of incredible. For long-term investors, the stock presents a reliable investment vehicle capable of recording market-beating returns without taking on big risks.
