Warren Buffett is widely regarded as one of the most successful investors of all time, and for good reason. His diversified holding company, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%), has delivered an impressive annualized return of 19.8% for its shareholders since 1965, beating the broader markets by a wide margin.
Which Buffett stocks stand out as top buys in August? Amazon (AMZN 3.43%) and Apple (AAPL -0.35%) are both no-brainer picks this month. Here's why.
Amazon: A wide economic moat
Berkshire Hathaway, under the direction of Buffett protégés Ted Weschler and Todd Combs, began buying Amazon shares in 2019. Although Amazon is not an official Buffett pick, the legendary investor has always praised the entrepreneurial skills of CEO Jeff Bezos, as well as Amazon's dominant position in its core markets such as online retail, cloud computing, and digital advertising.
What makes Amazon a rock-solid pick for investors? In addition to its impressive earnings results in the second quarter of 2023, Amazon seems ready to resume its long-term growth trajectory after a pain-filled 2022, thanks to the strong performance of its lucrative advertising business and growing demand for its cloud computing service, Amazon Web Services.
According to Wall Street analysts, these two key growth engines should help increase annual revenue by a solid 11.5% in 2024. In the long run, Amazon's strategy of incorporating artificial intelligence and machine learning into its operations should also enhance its profitability and operational efficiency, and should also extend its competitive advantages in the fields of cloud computing, e-commerce, and advertising.
Bottom line: Amazon's wide economic moat across its various operating segments should translate into stellar returns over the next several years.
Apple: A centerpiece of Buffett's portfolio
Berkshire Hathaway has been gobbling up Apple shares since 2016. The tech giant currently accounts for nearly 47% of the conglomerate's stock holdings, making it Berkshire Hathaway's largest stock position by a wide margin. Buffett is a big fan of Apple and its iconic iPhone. In a recent commentary, for example, Buffett called the iPhone an "extraordinary product" and Apple a "better business than any we own."
What makes Apple such a great stock to own for the long term? Apple has a loyal and satisfied customer base that's willing to pay a premium for its products and services. Apple's operating system is easy to use and integrates seamlessly with its ecosystem of apps, devices, and services. This creates a high switching cost for customers who want to keep using their favorite features, such as iCloud, iMessage, FaceTime, and more. Apple also keeps innovating and launching new products and services that attract and retain customers, such as the Apple Watch, AirPods, Apple Pay, and Apple Fitness+.
Apple rewards its shareholders generously with dividends and share buybacks. In the last quarter alone, Apple returned $24 billion to its shareholders. Apple has also increased its dividend every year since 2013 and has reduced its share count by more than 38% since 2013. These actions enhance shareholder value and support the stock price over time.
All told, Apple is a fantastic company that Buffett loves for its quality, growth, and shareholder friendliness. Apple has a loyal customer base, a dominant market position, a culture of innovation, and a generous capital return policy. These factors make Apple a great stock to own for the long term.
