Warren Buffett is widely regarded as a prominent figure in the investment world. His company, Berkshire Hathaway, has evolved into a trillion-dollar entity and has helped Buffett amass a fortune of $160 billion, securing his position among the wealthiest individuals globally.
Given this level of success, many individuals are interested in Berkshire Hathaway’s stock holdings as a source of investment inspiration. Consequently, numerous websites, newsletters, and platforms are devoted to closely monitoring the portfolio movements of Buffett and Berkshire Hathaway.
Berkshire Hathaway’s portfolio consists of over 45 stocks, but two stocks, in particular, stand out as appealing long-term investments.
1. Amazon
Amazon, identified by the ticker symbol AMZN, is one stock that Buffett initially hesitated to invest in until he was persuaded by one of his managers. This decision proved beneficial, as Amazon’s stock value has more than doubled since Berkshire Hathaway first invested in it in early 2019.
Amazon’s growth is attributed to its e-commerce business, which has evolved into a dominant force in the tech industry. Although e-commerce continues to drive Amazon’s revenue, accounting for approximately 83% of it in 2024, the company’s long-term appeal lies in its cloud platform, Amazon Web Services (AWS). Launched in 2006, AWS is considered a pioneer in modern cloud services.
AWS has established itself as a significant entity, contributing 58% of Amazon’s operating income, although it represents only about 17% of the company’s revenue. In 2024, AWS achieved an operating income of $39.8 billion, surpassing the total revenue of many Fortune 500 companies.
The cloud services industry presents significant growth potential. With advancements in artificial intelligence, the need for remote work infrastructure, cybersecurity, collaboration tools, and increased digitization, cloud providers are poised for substantial growth. As of 2023, the cloud industry was estimated to be around $600 billion, and it is projected to reach $2.4 trillion by 2030, representing a compound annual growth rate of approximately 21%.
Apart from e-commerce and AWS, Amazon is diversifying its business through the expansion of its advertising segment, growth of Amazon Prime, and ventures like Supply Chain by Amazon, which leverages logistics networks for profit. This diversification enhances Amazon’s appeal as a long-term investment.
2. Visa
Visa, identified by the ticker symbol V, does not conform to the "diversified business" model but serves as a cornerstone of the global financial system due to its extensive reach and business model.
Visa operates in over 200 countries and territories, accepted by more than 150 million merchants, with approximately 4.7 billion cards in circulation. In 2024, Visa processed payments totaling $15.9 trillion.
Visa’s reach far surpasses its competitors due to the network effect. Cardholders prefer Visa due to its wide acceptance, and merchants opt for it as it is the most popular card globally.
The business model Visa employs is straightforward, involving a percentage of each transaction processed through its network. This model yields high margins, as costs do not significantly increase with additional transactions.
In the first quarter of fiscal 2025, ending December 31, Visa’s net income was $5.1 billion on $9.5 billion in revenue, both of which have seen substantial growth over the past decade.
The growth of digital payments adds to Visa’s long-term appeal. Even though Visa does not directly benefit from cash transactions, it stands to gain significantly from the global shift towards cashless payments. According to a McKinsey report, electronic payment volume increased by 17% from 2018 to 2022, and the average number of cashless transactions per person rose from 91 to 135 between 2017 and 2020. Given current trends in electronic payments, these numbers are likely higher today.
Visa’s growth is contingent on consumer spending, and economic downturns could impact its business during certain periods. However, as the world continues to move toward digital payments, Visa is well-positioned for long-term growth.
John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, serves on the board of directors for The Motley Fool. Stefon Walters has no financial interest in the stocks mentioned. The Motley Fool holds positions in and recommends stocks like Amazon, Berkshire Hathaway, Netflix, Salesforce, and Visa.
