You won’t find many of the hottest growth stocks on the market in Warren Buffett’s Berkshire Hathaway portfolio. His approach focuses more on stocks with attractive valuations and underlying business models that are in his circle of competence.
However, I didn’t say you won’t find any of these sizzling stocks among the legendary investor’s holdings. Buffett has $177 billion invested in these “Magnificent Seven” stocks.
Buffett’s “Magnificent Two”
The Magnificent Seven narrows down to the “Magnificent Two” as far as Buffett is concerned. It’s also probably fair to say that he views one of those two stocks as much more magnificent than the other.
Apple (NASDAQ: AAPL) ranks as the biggest position in Berkshire’s portfolio by far. The conglomerate’s stake is currently worth close to $175.9 billion.
One of Berkshire’s other investment managers first bought 10 million shares of Apple in May 2016. However, it didn’t take long for Buffett to jump aboard the Apple train. Buying the stock turned out to be a very good move. Apple’s shares have soared more than 8x since Berkshire first purchased the stock, including a gain of more than 30% over the last 12 months.
Amazon (NASDAQ: AMZN) stands as the only other Magnificent Seven stock in Berkshire Hathaway’s portfolio. As was the case with Apple, another Berkshire investment manager initiated the position in Amazon. Buffett acknowledged shortly after the purchase of Amazon stock in 2019 that he had “been an idiot for not buying” sooner. Berkshire’s stake in the e-commerce and cloud services giant is currently worth around $1.6 billion.
Even though Buffett was late to the party with Amazon, he’s had plenty to celebrate. Over the last 12 months alone, the stock has skyrocketed nearly 60%.
Which stock could soar the most in 2024?
A greater percentage of analysts have bullish takes on Amazon than do Apple. I don’t always agree with the prevailing view on Wall Street, but in this case, I think that the analysts are probably right.
Apple is a wonderful business. The stickiness of its iPhone ecosystem is truly impressive. However, investors should reasonably expect strong growth from a stock that trades at a forward earnings multiple of 29x. They’re not getting it with Apple right now.
Meanwhile, Amazon continues to deliver tremendous earnings growth. The company’s streamlining efforts are paying off. I predict that we’ll see more evidence of this in the coming quarters as Amazon’s profitability and free cash flow increase further.
Amazon also has a clear catalyst both over the near term and the long term. The rising adoption of artificial intelligence (AI), in particular, generative AI, should spur more organizations to shift their IT spending to the cloud. As the leader in the cloud services market, Amazon Web Services stands to be a key beneficiary of this trend.
The U.S. economy appears to be demonstrating more resilience than many expected as well. That bodes well for Amazon’s e-commerce business in 2024.
Buffett’s secret Magnificent Seven stocks
Apple and Amazon are the only Magnificent Seven stocks you’ll see listed in Berkshire Hathaway’s portfolio. However, Buffett and Berkshire do own two other members of the group.
Berkshire’s subsidiary, New England Asset Management (NEAM), has a separate portfolio. Like Berkshire, NEAM has a stake in Apple. It also owns shares of Google parent Alphabet and Microsoft.
Could either of these other Magnificent Seven stocks ever find their way into Berkshire’s portfolio? I think it’s possible. Buffett has expressed his admiration for Google and Microsoft in the past. The biggest obstacle, for now, is probably the valuations of the two stocks. It wouldn’t be a shock, though, if Buffett (or one of his lieutenants) scooped up Alphabet and/or Microsoft in the future.
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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool has a disclosure policy.
Warren Buffett Has $177 Billion Invested in These “Magnificent Seven” Stocks. Here’s Which 1 Could Soar the Most in 2024. was originally published by The Motley Fool
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