Warren Buffett is often called the most successful investor of all time. His conglomerate, Berkshire Hathaway, has grown into the world's ninth-biggest company by market capitalization, among a top 10 that also includes names like Alphabet, Microsoft, and Nvidia. Meanwhile, the total value of its stock portfolio has hit $345 billion.
Given that portfolio's record of growth, it's not a bad place to seek inspiration when looking for new candidates to add to your portfolio. Buffett and his lieutenants have filled it with solid growth stocks and companies with long histories of providing investors with consistent gains.
Two of the most attractive stocks in Berkshire's portfolio now are Apple (AAPL 0.50%) and Amazon (AMZN -1.61%). Both have hit record heights in their respective industries, achieving dominance that will likely continue to offer steady boosts to earnings over the long term. Their stocks are excellent options for those looking to grow a pot of savings into serious money.
The case for buying Apple now
Apple is by far Berkshire Hathaway's biggest stock holding, accounting for 48% of the value of its equity portfolio. For reference, its second-largest holding is Bank of America, which accounts for 8% of the portfolio's value. Warren Buffett has become a huge proponent of Apple over the years, often praising its market dominance, brand recognition, and the loyalty it enjoys from consumers.
Apple's stock has risen by 589% since Berkshire Hathaway first invested in 2016, and it has continued to add to its stake in the tech giant over the years -- even as recently as January, when it purchased about 20 million shares.
One of the most attractive aspects of Apple's business is its nearly unrivaled dominance in consumer tech. The immense popularity of the iPhone has allowed Apple to gain leading market shares in many of its other product categories. The company has strategically designed an interconnected ecosystem for its devices, software, and services that encourages iPhone users to stick with Apple when shopping for computers, tablets, smartwatches, or headphones rather than straying to its rivals' products.
Apple has further cashed in on consumer preference for its products by venturing energetically into digital services. Platforms like Apple TV+, Music, iCloud, Fitness+, and more have diversified its revenue streams and allowed it to profit from the attractive profit margins that subscription services offer.
Over the last five years, Apple's annual revenue has soared by 52%, with operating income up 87%. The company has faced challenges this year due to macroeconomic headwinds. However, its dominance in tech means it could profit significantly during the next recovery. Meanwhile, recent expansions into high-growth sectors like artificial intelligence (AI) and virtual reality only strengthen its long-term prospects and make it an attractive investment.
The case for buying Amazon now
Berkshire Hathaway has dedicated 0.4% of its portfolio to Amazon. While that might not sound like a lot, it represents well over 10 million shares worth about $1.4 billion.
Amazon has been a big winner on Wall Street this year, with its stock climbing 57% since Jan. 1. However, that gain came in the wake of an even steeper plunge in 2022. At this point, it's still down more than 30% from its late 2021 peak, and off by about 24% from Jan. 1, 2022. Still, investors have regained their appreciation for the company as it has returned its e-commerce business to profitability while making heavy investments in the AI market. As the biggest name in online retail and the cloud market, Amazon has massive growth potential over the long term.
According to Statista, the e-commerce market is projected to hit $5.5 trillion by 2027, expanding at a compound annual rate of 11%. Amazon holds leading market shares in multiple countries, meaning it is well positioned to profit considerably as that sector develops.
The company's retail business proved vulnerable to economic headwinds last year, with reductions in consumer discretionary spending causing steep profit declines in its e-commerce segments. However, Amazon has made a solid comeback in the space this year, with its North American segment hitting over $3 trillion in operating income in the second quarter of 2023 after reporting $627 million in losses a year ago.
Moreover, the company's cloud platform, Amazon Web Services (AWS), has made promising inroads in AI. AWS is rapidly expanding its library of AI services and recently announced a venture into chip development. Additionally, news broke last month that Amazon will invest up to $4 billion into Anthropic, a rival to ChatGPT developer OpenAI. The partnership will help Amazon combat intensifying competition from Microsoft, which holds a substantial stake in OpenAI.
Amazon hasn't had it easy amid the complex macroeconomic headwinds of the past couple of years. However, the impressive turnaround it has executed in its e-commerce business illustrates the strength of its management team, as does its aggressive expansion into AI. With all that in mind, this Buffet stock would be an excellent option for anyone looking to turn idle cash into growing wealth.
