Warren Buffett and his team and Berkshire Hathaway (BRK.A +1.34%) (BRK.B +1.22%) have put together one of the most impressive runs in stock market history. $10,000 invested in Berkshire Hathaway 40 years ago is now worth nearly $4 million, and a large part of its success has come from the stock picks within its investment portfolio.
By examining the stocks within the firm's portfolio, investors can have a glimpse into one of the most successful stock-picking businesses of all time. Within his portfolio are two stocks that I think investors and Berkshire Hathaway should be buying more of. They are Amazon (AMZN +3.97%) and Visa (V 0.03%), and I think investors should be taking advantage of the price the market is giving you right now.
Amazon
Amazon is a lot more than an e-commerce site for buying goods. It has a thriving advertising business, a dominant cloud computing offering, and a growing third-party seller service that takes the burden of forecasting trends and obtaining inventory off Amazon's shoulders.
NASDAQ: AMZN
Key Data Points
This has transformed Amazon into a much more lucrative investment, as its gross margins have substantially expanded as the company's business has moved into higher-margin offerings.
AMZN Gross Profit Margin (Quarterly) data by YCharts
This gross margin expansion allowed Amazon to drastically improve its cash flows, which will allow Amazon to repay debt, repurchase shares, start a dividend, or invest in a different business area.
Within its current business set, none is more promising than Amazon Web Services (AWS), its cloud computing wing. AWS is set to capitalize on the massive cloud computing trend, a vital infrastructure piece for storing data, creating AI models, and doing other computational tasks. The cloud computing market opportunity is expected to increase to more than $1 trillion by 2028, and with Amazon owning the No. 1 market share, it's set to capitalize on this expansion.
Despite all of the success Amazon is having, its stock is valued around levels last seen in 2016.
AMZN PS Ratio data by YCharts
Right now looks like an opportune time to load up on Amazon shares, as its transformation is just starting, and there is still a massive opportunity in cloud computing.
Visa
Visa's credit processing is a vital part of commerce infrastructure. Without it, a significant portion of monetary flow would be impaired because cash cannot be used online. Although there are several competitors in this space, Visa is the largest and has a fantastic business model.
The tollbooth business model is one that Buffett has long praised. For Visa, this involves taking a small slice of the money that flows through its channels, similar to how a toll booth collects a toll for all traffic and commerce that flow through it. With Visa setting their toll booth up on the flow of money through commerce, it could be seen as one of the best available to invest in. It's also doing quite well right now.
NYSE: V
Key Data Points
In the fourth quarter of fiscal-year 2023 (ending Oct. 31), Visa's revenue rose 11%, and earnings per share (EPS) shot up 22%. These strong cash flows led to the board of directors to increase the dividend by 16% and authorize a new $25 billion multiyear share repurchase program. This demonstrates Visa's strong position, as it can pay a decent dividend and buy back shares, and still grow at a market-average pace, almost guaranteeing investors a market-crushing investment.
It's rare to find companies that can consistently grow above 10% per year and pay a dividend, but that's exactly what Visa is. Furthermore, the stock is the cheapest it has been in a long time.
V PE Ratio data by YCharts
There have been few times over the past decade that Visa has traded at these levels. With the company doing well and the stock not demanding a massive premium, right now could be one of the best opportunities to purchase Visa in a long time.
