2 Warren Buffett Stocks Everyone Should Own – The Motley Fool | Hot Mobile Press

Berkshire Hathaway (BRK.A 0.80%) (BRK. B 0.83%) CEO Warren Buffett has a talent for making money. Since 1965, he’s guided Berkshire stock to a 20% compound annual return. That average return would have turned $1,000 into $36 million in 57 years.

Buffett’s record for making money is why many investors are watching his every move, but it should be noted that not all stocks Berkshire owns are Buffett picks. The company has two other investment managers who oversee a small portion of Berkshire’s assets. Because Ted Weschler and Todd Combs were chosen to eventually oversee Berkshire’s entire portfolio if one day Buffett isn’t around, these managers also have excellent investing skills and are worth pursuing.

Let’s look at two Berkshire holdings, Apple (AAPL -0.42%) and Amazon (AMZN -0.91%)which every investor should feel comfortable in owning for many years.

1. Apple

If you want to follow Buffett, you might as well start with Berkshire’s largest holding. Apple is one of the largest investments Buffett has ever made in any company, public or private. That speaks volumes about what Buffett thinks about Apple’s business. The stock is up over 400% since Berkshire first bought shares in late 2016.

Apple is the most valuable brand in the world according to Brand Finance’s Global 500 list for 2022. The tech giant has sold millions of iPhones, iPads and Macs, taking its total active device base to 1.8 billion at the start of the year.

The strength of the Apple brand is evident in the growth of its service business. This includes app sales, subscriptions, iCloud storage plans, AppleCare protection plans, and more. Spending in these areas reflects a customer base that’s heavily invested in the Apple ecosystem. On a trailing 12-month basis, services revenue through the quarter ended March totaled $75 billion, accounting for nearly 20% of Apple’s total revenue.

The services business is emerging as a key value driver for Apple, as it generates twice the gross margin of hardware. More iPhone and Mac sales will create more demand for services. Against this backdrop, revenue for the fiscal second quarter ended March 26 rose 9% year over year, driven by a record quarter in March for iPhone, Mac, household products and wearables.

Apple has a strong brand, a growing services business, and a mountain of $73 billion in cash to invest in new products. That’s why it can anchor anyone’s portfolio.

2. Amazon

Amazon is a smaller position in Berkshire’s stock portfolio, which also means it was bought by one of Berkshire’s investing lieutenants. Still, Amazon has the hallmarks of what Buffett is looking for in a long-term investment.

According to Brand Finance, Amazon is the second most valuable brand in the world. The company has forged close ties with its customers through its vast array of goods and services. Products like Echo smart home devices and grocery delivery through Whole Foods Market keep customers connected to the Amazon ecosystem.

While Amazon is involved in many businesses, including cloud services and, increasingly, healthcare, Prime members continue to be a key driver of the company’s growth. With over 200 million Prime members, Prime Day has become an annual shopping holiday. During the last event in July, US customers were buying over 60,000 items per minute.

It’s hard to say which is more impressive: order volume or Amazon’s ability to fulfill those orders. Both speak to Amazon’s unassailable competitive advantage in retail.

Amazon has generated a tremendous amount of free cash flow over the past few years. It uses those resources to reinvest in expanding its fulfillment capacity to meet demand. The company spent $61 billion last year through the first quarter, 70% of which went on infrastructure to support cloud services and its retail business.

These investments extend Amazon’s competitive edge and all but guarantee that the company will continue to generate returns for shareholders.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has positions at Amazon. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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