Warren Buffett is widely considered one of the greatest investors ever because he has delivered excellent returns for a long time. The Oracle of Omaha's investing strategy was effective 10 years ago. It remains effective today, and it will likely still be so in a decade. So, for investors looking to start the year right, it's not a bad idea to peek into Buffett's stock picks.
With that as a backdrop, let's consider two stocks in the equity portfolio of Buffett's Berkshire Hathaway that are particularly worth investing in today and holding onto for a while: Apple(NASDAQ: AAPL) and Amazon(NASDAQ: AMZN).
1. Apple
Apple has been one of Buffett's favorite companies for a while now. Berkshire Hathaway first added the tech giant's shares to its portfolio in 2016. True, Apple's business has changed quite a bit since them. The iPhone is no longer the growth driver it once was. The company has also come under increased scrutiny from lawmakers because of alleged anticompetitive practices.
However, the stock continues to perform well and is still an excellent buy-and-hold option for long-term investors. Let's consider three reasons why.
First, Apple recently introduced a suite of artificial intelligence (AI) features for its latest iPhones and other devices. This could trigger a strong upgrade cycle, meaningfully improving iPhone sales. Second, and more importantly, Apple's ventures into AI are just starting. As CEO Tim Cook, said during Apple's latest earnings conference call: "This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come."
Apple has made a fortune by improving existing products and technologies. The company has an internal culture of innovation, an incredible track record, and generates plenty of free cash flow. All these factors should allow Apple to make more meaningful progress in AI in the future.
Third, Apple's services segment continues to grow, and has been increasing its revenue faster than the rest of its business for a while. Apple boasts more than 2 billion active devices and more than 1 billion paid subscriptions. Investors can reasonably expect Apple to find more ways to monetize its massive user base. The company's service offerings span industries from healthcare to video and music streaming.
We haven't even mentioned Apple's competitive advantage, which stems from several sources, including the network effect, switching costs, and a strong brand name. Nor have we considered Apple's strong dividend program, another key reason the stock is a favorite of Buffett's. All in all, Apple is still an outstanding stock to hold onto this year and beyond, despite the issues the company has faced recently.
2. Amazon
Amazon stock makes up only a tiny portion of Berkshire Hathaway's portfolio. However, don't take the relatively small size of the position to mean that it's not worth investing in. Amazon remains the runaway leader in the U.S. e-commerce market, with a 37.6% share as of 2023.
That said, the e-commerce business is not the most exciting part of the company. Its cloud computing unit, Amazon Web Services (AWS), is the global market share leader in cloud infrastructure, and has been the main contributor to the tech leader's profits in recent years.
In the first nine months of 2024, Amazon's net sales increased by 11% year over year to $450.2 billion. AWS' sales were up 18% to $78.8 billion. However, despite providing just 17.5% of total revenue, AWS accounted for 61.6% of the company's operating income.
That cloud business is only getting better, partly thanks to AI. The company offers various AI services through the cloud. It is already a multibillion-dollar-a-year business, according to management.
Considering how much growth the cloud computing and AI markets will experience in the coming years, we can expect Amazon to benefit. The company will make headway elsewhere, too. It's a leader in several other industries, including video streaming and grocery shopping. The company's healthcare operations -- especially its pharmacy -- are making progress.
What does all this mean for investors? Despite being worth over $2 trillion, Amazon's growth prospects remain intact. The company should continue delivering excellent financial results and robust stock performance for a long time.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
