Whether you're a casual investor or trade professionally, chances are you're familiar with Warren Buffett. The investing mogul owns Berkshire Hathaway, one of the world's most successful holdings companies. Its success has seen it achieve a market cap of $909 billion, making it the world's eighth-most-valuable company and putting it in a similar league to some of the biggest tech giants.
Berkshire Hathaway's portfolio posted a nearly-20% compound annual gain from 1965 to 2023, and is now worth $373 billion. Much of the company's growth is owed to the tech market, with at least 45% of its portfolio dedicated to tech stocks Apple (AAPL 2.67%) and Amazon (AMZN 0.30%).
Data by YCharts
These companies are home to potent brands and have delivered impressive gains over the last five years. While past growth isn't always an indication of what's to come, Amazon and Apple have exciting outlooks as they expand into budding industries like artificial intelligence (AI), cloud computing, and virtual/augmented reality (VR/AR).
These are two no-brainer Warren Buffett stocks to buy right now.
1. Amazon
Amazon accounts for about 0.5% of Berkshire Hathaway's portfolio, with its stake valued at $1.8 billion. The e-commerce leader has delivered stellar growth over the last few years despite market headwinds, proving its worth as a long-term investment.
Amazon dominates e-commerce in dozens of countries, a market expected to hit $3.6 trillion in 2024 and expand at a compound annual growth rate (CAGR) of 10% through 2028. The tech company will likely continue profiting from the sector's tailwinds for years.
However, Amazon's biggest growth catalyst is easily its cloud platform, Amazon Web Services (AWS). In the fourth quarter of 2023, revenue from the platform rose 13% year over year to $24 billion. Meanwhile, AWS was responsible for 54% of the company's operating income, despite earning the lowest portion of revenue between its three segments.
Moreover, AWS gives Amazon a lucrative role in AI, a market projected to develop at a CAGR of 37% until at least 2030. As the world's biggest cloud service provider, AWS has the potential to leverage its massive cloud data centers and steer the generative AI market.
Data by YCharts
This chart shows Amazon's earnings could reach nearly $7 per share over the next two fiscal years. When multiplying that figure by the company's forward price-to-earnings ratio (P/E) of 43, you get a stock price of $300. From its current position, these projections would see Amazon's stock rise 67% by fiscal 2026, far exceeding the S&P 500's growth over the last two years.
Amazon has a lucrative retail business and a promising outlook in AI, making it a Warren Buffett stock worth considering now.
2. Apple
Apple is by far Berkshire Hathaway's biggest holding, responsible for 42% of its portfolio. The company's 6% stake in the iPhone giant is worth more than $155 billion, and has delivered major gains over the years. In fact, since Berkshire Hathaway first invested in Apple in 2016, its stock has risen 552%.
Apple is coming out of a tricky year. Macroeconomic headwinds caught up with the company in its fiscal 2023 (which ended Sept. 30, 2023), and revenue dipped by 3%. However, the results from its fiscal 2024 first quarter (which ended Dec. 31, 2023) showed signs that a recovery could be underway.
During the quarter, Apple's net sales rose 2% year over year to $120 billion, beating analysts' expectations by more than $1 billion and breaking a streak of four consecutive quarters of revenue declines. Meanwhile, its earnings hit $2.18 per share, compared to an expected $2.10 per share.
Additionally, the tech firm hit nearly $107 billion in free cash flow last year, far more than many of its rivals. As a result, the company is well equipped to overcome current hurdles and keep investing in high-growth sectors.
Recent challenges are why keeping a long-term perspective with proven growth stocks like Apple is crucial. The company has a highly lucrative digital services business, and is expanding into budding markets like AI and VR/AR, which should pull the company out of its slight slump and boost earnings long into the future.
Data by YCharts
Moreover, Apple is trading at a bargain compared to its peers. It has the lowest forward P/E and price-to-free cash flow of any of the companies in the chart above.
Forward P/E is calculated by dividing a company's share price by its estimated future earnings per share. Meanwhile, price-to-free cash flow divides a company's market cap by its free cash flow. These are helpful valuation metrics, as they take into account a company's financial health; the lower the figure, the better the value.
Apple may have hit some roadblocks this year, but it has the cash to keep investing in its business and flourish over the long term. The company's stock is a no-brainer buy this month.
