Warren Buffett is considered one of the greatest investors because he has delivered excellent returns for decades. 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: That’s the quickest way of copying the man’s strategy. With that as a backdrop, let’s consider two stocks Buffett’s Berkshire Hathaway (BRK.A 1.42%) (BRK.B 1.38%) owns that are worth investing in today and holding onto for a while: Apple (AAPL -0.48%) and Amazon (AMZN -0.32%).
1. Apple
Apple has long been one of Buffett’s favorite companies. The Oracle of Omaha’s conglomerate first bought the tech giant's shares in 2016. True, Apple’s business has changed quite a bit since. Apple’s famous iPhone is no longer the growth driver it once was. Apple has also come under increased scrutiny from lawmakers because of alleged antitrust 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)-based features to its latest iPhones and other devices. This move could trigger a strong cycle of renewals, meaningfully improving iPhone sales. Second, and more importantly, Apple’s ventures into AI are just starting. As the company’s 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.
AAPL Free Cash Flow data by YCharts
All these factors should allow Apple to make more meaningful progress in AI in the future. Third, Apple’s services segment continues to grow. It has been increasing its revenue faster than the rest of its business for a while. Apple boasts over two billion active devices and more than a billion paid subscriptions. Investors can reasonably expect Apple to find more ways to monetize its massive audience. The company’s services span several 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 it 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 it has faced recently.
2. Amazon
Amazon makes up a tiny portion of Berkshire Hathaway’s portfolio. Not that this means it’s not worth investing in the company. Amazon remains the runaway leader in the U.S. e-commerce market, with a 37.6% share of the market as of 2023. That said, the company’s e-commerce business is not the most exciting. Consider Amazon’s cloud computing unit, Amazon Web Services (AWS). This segment -- where Amazon holds the top market share -- 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% compared to the year-ago period to $78.8 billion. And despite making just 17.5% of Amazon’s revenue, AWS accounted for 61.6% of its operating income. Amazon’s cloud business is only getting better, partly thanks to AI. The company offers various AI services through the cloud. It is already a multi-billion dollar a year business, according to management.
Considering how much growth the cloud computing and AI fields will experience in the coming years, we can expect Amazon to benefit. The company will make headway elsewhere, too. Amazon is 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 stock market performances for a long time.
