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Warren Buffett has said that he uses his area of expertise when evaluating companies to invest in. That means he evaluates companies in areas that he fully understands. That’s why he initially didn’t invest in the company behind the world’s largest e-commerce platform. It is a similar story with his investment in the company, which at 43.7% has the largest stake in Berkshire Hathaway (WKN: A0YJQ2) briefcase.
These companies are two of the largest in the world by market capitalization. Both are led by innovative visionaries creating devices and platforms that will expand and continue to generate profits. Both generate recurring income that should please long-term investors.
As far as innovations Apple (NASDAQ: AAPL) and to really understand the gains for investors, you need to know the beginnings of the climb. Steve Jobs was the CEO of Apple from 1997 to 2011. During this time, the company developed the Apple Store, iMac, iPad, iPod, and iPhone. The stock traded at $0.19 split adjusted in August 1997 and was up 7132% through August 2011 at $13.74. After Jobs’s death, Tim Cook took over.
Since then, the company has continued on its way, rewarding investors with a share price increase of more than 1,000%. The company has provided consumers with updates on the devices Jobs oversees as he develops new products and services. Includes AirPods, Apple Watch, Apple Music, and Apple TV+. And I dare say we could see an Apple Car in the next few years.
One of the biggest investors to be rewarded is Warren Buffett. Some might say that Buffett was too late, as Berkshire didn’t start buying Apple stock until 2016. In any case, the stock price has risen 500% since then, and Apple is far ahead of the rest of its stock. Berkshire’s portfolio with almost 44% of the total, followed by Bank of America with 13% and Coca-Cola with 7% of the total. total portfolios.
Cook has said the company takes a long-term view, calling Buffett the ultimate long-term investor. That long-term focus seems to be paying off for Buffett, not only in terms of share price but also in terms of dividends. In 2021, Buffett paid out more than $3 billion in dividends alone. Most of his top three stocks, which average a 1.9% dividend yield, above the yield of the S&P 500 1.27% (as of December 31) and above the S&P 500 long-term average of 1.86%.
One possible takeaway from Buffett’s late arrival at Apple is that things are looking up for a long time. Quarterly service sales are growing at a record pace. He is preparing a new mid-range 5G iPhone. Apple makes its own M1 chips, and performance enhancements are in development for the new Mac Studio desktop. Finally, Apple TV + offers live sports broadcasts. Thanks to all these developments and a strong iPhone ecosystem, it never seems too late to invest in Apple.
One topic that keeps coming up is a stock split to Amazon (WKN: 906866). Investors are eagerly awaiting the upcoming 20:1 stock split. But before we get into that, let’s take a look at why Amazon has long been a holding company for Buffett.
Berkshire Hathaway invested in Amazon in two waves in 2019, but it wasn’t Buffett who made the purchase, it was one of his Berkshire partners. So Buffett originally went through this stock, so he also goes through the best.
Since Berkshire bought Amazon in 2019, the stock is up 52%. In dollar terms, a $10,000 investment would be worth $15,000 today less than three years from now.
Amazon increased net sales by 22% year-over-year in 2021, driving a 55% increase in net income driven by a growing and successful portfolio of projects. The company’s products include virtual assistant technology, home security, a leading e-commerce platform with Prime subscriptions, streaming video, groceries, healthcare, and Amazon Web Services. This latter division has grown exceptionally well at 40% year over year.
The first quarter will end with a market decline. Still, Amazon seems focused on its share price and expanding its portfolio. The company announced that it would repurchase shares worth $10 billion. This may indicate that the company believes the stock is currently undervalued. It can also boost investor confidence and lead to a rapid rise in share price.
Another stock that causes a quick rise is the stock split. The day after announcing the buyback and a 20-for-1 stock split, the first split since 1999, shares were up 5.5% overnight.
Now the company is moving forward with new entertainment offerings, including movies, series and an 11-year deal to carry NFL broadcasts of Thursday Night Football. It’s all said to generate hundreds of millions of dollars in new Prime subscriptions, repeat member purchases, and ad revenue.
The deal also allows Amazon to take over all NFL Sunday programming. More and more cable and satellite TV subscribers are switching to streaming services.
Buffett may not have been the one who bought Amazon stock for Berkshire, but he knows what makes a great company. Even after its recent price increase to $2,936 per share, investors still have a chance to buy Amazon at a 43% discount to analysts’ 12-month average price target. Better late than never.
The article 2 Buffett Stocks to Buy Long first appeared in The Motley Fool Germany.
Jeff Little owns shares of Amazon and Apple. The Motley Fool owns shares and recommends Amazon, Apple and Berkshire Hathaway (B shares). This article was published on 03/14/2022 on Fool.com and it was for our german readers translated.
Motley Fool Germany 2022