Apple is by far Warren Buffett's largest investment at Berkshire Hathaway. The stock accounts for a jaw-dropping 47% of Berkshire's investment portfolio, easily making it its largest holding.
But other stocks within Berkshire's investment portfolio look like much better buys than Apple right now. Among them are Amazon (AMZN 3.43%) and Visa (V -0.23%), and I'm willing to state that they should outperform Apple in 2024.
Visa's and Amazon's businesses are more resilient than Apple's
All three of these companies are very well known, and all are sizable companies. Visa is the smallest of the three, even though it's the 11th-largest globally, at a $532 billion market cap.
All three also operate in entirely different businesses, with Apple involved in consumer electronics, Visa providing payment processing, and Amazon in many industries, including e-commerce, cloud computing, and advertising.
Apple's business does well when consumers have sizable amounts of disposable income. When they don't, consumers either postpone their purchase of the latest and greatest tech or ignore purchasing some accessories. This is one reason Apple's revenue growth went negative in 2023.
AAPL Revenue (Quarterly YoY Growth) data by YCharts. YoY = year over year.
Furthermore, it likely won't return to the fast levels experienced a few years ago. But Amazon and Visa are two different stories.
Amazon
Amazon's growth is starting to reaccelerate after slowing in 2023. In Q3, it rose to a 13% growth rate after sitting around the high single digits for a few quarters. There wasn't just one bright spot in these results; all three segments (North America, international, and Amazon Web Services) posted similar growth figures.
But in 2024, Amazon Web Services (AWS) should have a banner year. Although its growth slowed as customers optimized their spending throughout 2023, management stated that the trend is starting to wrap up. With new workloads coming online (thanks to the artificial intelligence trend), 2024 should mark a reacceleration of growth.
Amazon is also doing incredible things on the bottom line. As it has broadened its business beyond e-commerce, its margins have drastically improved. Furthermore, it has made various changes within its commerce division (like closing warehouses, laying off employees, and cutting unprofitable programs) to improve efficiency there.
AMZN Gross Profit Margin (Quarterly) data by YCharts.
This has allowed Amazon to post nearly all-time-high margins on three levels. If Amazon can sustain these improvements (or build upon them) in 2024, investors will see a side of Amazon that has eluded them for years: consistent profits.
No one knows what this looks like for Amazon, making it such an exciting time to invest in the stock. With Amazon growing and improving its business, it is a far better investment than Apple.
Visa
It's hard for a company like Visa, which posted 66% and 54% operating and net profit margins, respectively, in Q4 of FY 2023, to make many improvements. However, it allows Visa to convert an unreal amount of revenue into cash each quarter. And with Visa's revenue rising 11% in the fourth quarter of fiscal 2023 (ended Sept. 30), it can rapidly grow profits, too.
Visa also engages in an aggressive share repurchasing program, allowing it to grow its earnings per share (EPS) faster than revenue. In fiscal 2023, it repurchased $16.1 billion in shares, about 3% of the company. In Q4 alone, its repurchases topped $5 billion because the stock dipped to a valuation not seen in years.
AAPL PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
Though Visa is a far more profitable business than Apple (and growing faster, too), it's valued at about the same level. The valuation difference between these two hasn't been this close over the past decade, which is a flashing signal to investors that it's time to load up on Visa stock.
Additionally, when considering their forward price-to-earnings (P/Es) ratios (which use analyst projections), Apple and Visa trade at 28 and 26 times forward earnings, respectively.
Visa hasn't had a valuation that low in recent memory, and with the company still firing on all cylinders, it's a far greater stock to purchase than Apple.
