Warren Buffett has built an extraordinary legacy in the world of investing over the past 60 years. He has expertly guided Berkshire Hathaway (BRK.A -1.17%) (BRK.B -1.35%) to achieve remarkable returns that have transformed a modest $1,000 investment into an astonishing $55 million. This incredible journey showcases his deep understanding of market dynamics and value investing principles, which have consistently outperformed benchmarks.
As Buffett prepares to step back from his role at the end of this year, his enduring investment philosophy will remain a cornerstone for the new leadership at Berkshire Hathaway. Investors eager to emulate the strategies of the Oracle of Omaha can consider these two standout stocks that align with Buffett’s proven methods.
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1. Invest in Amazon for Exceptional Growth Potential
Berkshire Hathaway has maintained a significant position in Amazon (AMZN 0.81%) since 2019, with 10 million shares still held in the first quarter. Amazon stands as a dominant force in the market, generating over $650 billion in revenue from various streams including online retail, cloud computing, advertising, and other innovative services. Currently, the stock is trading at its lowest earnings multiple in years, presenting an attractive buying opportunity for savvy investors.
In the first quarter, Amazon reported a 9% year-over-year growth in total sales across all services. The compelling reason to consider purchasing shares now lies in the company’s potential for profit growth, driven by enhanced margins. Over the past three years, Amazon’s net income has tripled as the company has significantly improved operational cost efficiency, and further advancements are anticipated.
Amazon’s logistics operations are supported by over 750,000 robots that assist employees in locating, picking, and processing orders, resulting in faster delivery times and improved profit margins. The evolution of robotics in Amazon’s warehouses promises even greater advancements in efficiency, enabling the company to handle tasks typically performed by human workers. For instance, Amazon’s Vulcan robot can execute picking and stowing operations at speeds comparable to human employees. Given the early stages of robotics development at Amazon, the company is well-positioned to experience substantial productivity improvements as technology continues to evolve in the coming decades.
The potential for margin enhancements through automation in its e-commerce operations remains underappreciated in the stock’s current valuation. In the first quarter, Amazon’s earnings surged 62% year over year, yet the stock is trading at a multiple of 33 times trailing earnings—the lowest it has seen in over a decade. This favorable valuation offers investors a unique opportunity to buy shares, allowing them to benefit from the anticipated earnings growth that aligns with the company’s strategic direction.
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2. Secure Your Future with Berkshire Hathaway’s Enduring Legacy
Although 2025 marks the end of Buffett’s leadership at Berkshire Hathaway, he will retain his position as the company’s largest shareholder, owning 37.9% of the outstanding shares. This decision to keep holding every share reflects his unwavering confidence in the future leadership of the company.
Greg Abel is set to take over as CEO next year, and his selection by the board speaks volumes regarding his capabilities. Abel has been serving as vice chair of Berkshire’s non-insurance operations since 2018 and became CEO of MidAmerican in 2008, which has since been rebranded as Berkshire Hathaway Energy. This energy holding company reported an impressive $3.7 billion in operating profit last year, showcasing Abel’s expertise in managing substantial operations.
Buffett has built Berkshire Hathaway through strategic acquisitions, both outright and by purchasing partial stakes in various companies through the stock market. Abel is expected to continue this prudent approach to capital allocation, and Buffett himself is optimistic about Berkshire’s prospects under Abel’s stewardship. “The decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg’s management than mine,” Buffett stated during this year’s annual meeting.
Berkshire Hathaway boasts a robust equity portfolio valued at $263 billion as of the end of Q1, which includes significant investments in industry giants like Apple, American Express, and Coca-Cola. Furthermore, the company has an impressive array of outstanding businesses across sectors such as retail, manufacturing, insurance, and utilities. In fact, Berkshire’s operating profits across these diverse industries surged 27% last year, reaching a remarkable $47 billion.
Additionally, Berkshire Hathaway is sitting on a substantial cash reserve, ready to seize new investment opportunities. At the end of the first quarter, the company had $342 billion in cash and short-term investments. This solid financial foundation positions Berkshire Hathaway as a resilient business capable of withstanding market fluctuations and continuing its growth trajectory for years to come.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of Motley Fool Money. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
