Warren Buffett became famous for his market-beating value picks. His policy has shifted in recent years, allowing a few high-growth tech businesses to join Berkshire Hathaway's privileged table.
Apple (NASDAQ: AAPL), Berkshire's largest holding, may seem like a good recommendation. Close but no cigar. I admire Apple, but its revenue growth has stagnated since 2022, and Buffett sold 10 million shares last year. I prefer one of Berkshire's smaller tech bets, even though the stock makes up nearly 42% of his assets.
Amazon (NASDAQ: AMZN). E-commerce retailer and cloud computing pioneer is Buffett's 0.5% stock ownership, and the stake is five years old. Buffett regrets not investing sooner in Amazon, one of the most promising Internet firms today. Today, Amazon would be one of my initial long-term investments. Buy Amazon shares today, put them under your pillow, and watch them appreciate for years or decades.
Amazon's rollercoaster journey Inflation hurt the coronavirus lockdown e-commerce king. Amazon's pandemic-boosted revenues fell in 2022. At the bottom of that downturn, the corporation lost $30 billion in free cash flow. Wall Street reacted harshly. Beginning 2023, Amazon's stock has plunged 56% from its peak.
I hope you bought Amazon shares last year. It turned out the corporation was preparing for growth in a healthier economy. OpenAI had just launched the AI craze that's projected to fuel the IT sector for the foreseeable future, with Amazon Web Services (AWS) as a prominent platform supplier.
Naturally, generative AI technologies weren't expected to disrupt the tech industry in 2022. The inflation-fighting measures seemed painful rather than effective. Amazon was still burning a lot of cash due to a weaker retail business and overzealous infrastructure expansion during the coronavirus outbreak.
Yet, Amazon always solves problems. Free cash flow is at an all-time high of $32 billion, and sales growth is back to double-digits. After a two-year decline, Amazon stock is near record levels again. At 64 times trailing profits and 59 times free cash flow, Amazon shares aren't cheap, but I wish I had a dollar for every time somebody declared it "overvalued" in its three-decade triumph.
Overvalued to priceless Amazon is one of the world's largest and most valuable companies, but it may still grow. The AI surge, unmet overseas opportunities, and the reality that brick-and-mortar stores still dominate 85% of U.S. retail activity are catalysts. Amazon can exercise more e-commerce muscle.
Amazon belongs in any diversified investing portfolio with above-average growth prospects, but don't put all your eggs in one basket. Warren Buffett regrets not buying Amazon shares sooner, but you may still join this long-term growth train.
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