“When we own parts of great businesses with great management, our preferred holding period is forever.”
— Warren Buffett, Berkshire HathawayLetter to shareholders from 1998
Warren Buffett he created incredible wealth for Berkshire Hathaway shareholders. It was very inspiring for individual investors that he did this – as he alluded to in his 1988 letter to shareholders – by focusing on investing in quality companies and holding on for the long haul, unfazed by occasional market volatility.
Here are two stocks from Berkshire’s portfolio that can help you grow your savings for a richer retirement.
Berkshire held a great position in Apple(NASDAQ: AAPL) since 2016. Despite the recent stock selloff, Buffett noted earlier in 2024 that Apple would likely remain Berkshire’s largest holding by the end of the year. Indeed, Berkshire still held 300 million shares of the iPhone maker at the end of the third quarter, at a market value of nearly $70 billion. By comparison, Berkshire’s next largest stock holding, American Expressit was worth $41 billion.
In 2023, Buffett called Apple better than any company Berkshire owns, and it’s easy to see why. Apple has a growing and loyal customer base, and many of the company’s customers own multiple devices. From January 2018 to early 2024, Apple’s active installed base of devices increased from 1.3 billion to 2.2 billion.
Apple continues to attract new customers around the world. In the latest quarter, management reported that the active base reached another all-time high across all products and geographies.
This growth bodes well for the future of Apple’s services business, which generates much higher profit margins than hardware sales. Apple has focused on investing in expanding the quality and variety of services in recent years, which has led to more than 1 billion paid subscriptions on the company’s platform, helping drive record revenues during a year of weak iPhone sales.
Apple’s revenue rose 2% in the 2024 fiscal year that ended in September to $391 billion, driven largely by a 13% increase in services revenue. The introduction of Apple Intelligence could prompt more upgrades, as it only works on devices with a newer processor. This remains a key catalyst for improving growth as Apple integrates artificial intelligence (AI) features into its products and services.
The high margins that Apple makes on its products led the company to a huge net profit of $93 billion last year. Apple has plenty of resources to reinvest in new products and services to drive long-term growth. Stocks have rallied over the past year, but if you start with dollar-cost averaging over time, you should earn solid returns.
Berkshire held 10 million shares Amazon(NASDAQ: AMZN) in the third quarter and has held the position of leader in e-commerce and cloud computing since 2019. Amazon continues to grow its online retail business, while creating profitable opportunities to earn money in other services.
Amazon’s massive lead in e-commerce, with 6 times the market share of its next closest competitor, positions it well for long-term growth. Recent trends in consumer spending have made it difficult for Amazon to maintain high growth rates for its online store, but it still shows great potential. Lower selling prices are attracting more buyers, as paid unit growth accelerated to 12% year over year in the third quarter.
Ultimately, Amazon’s advantage is based on its Prime membership program. All the perks that Amazon continues to stack around Prime, including access to grocery delivery and medical prescriptions through RxPass, make it very difficult for customers to cancel their membership. Amazon said it had more than 200 million Prime members in 2021, but it’s still growing. Paid membership growth accelerated in the third quarter, leading to an 11% year-over-year increase in subscription revenue.
Most impressive about Amazon is its success in developing profitable revenue streams outside of its core retail service, such as its cloud computing division (Amazon Web Services). Amazon originally developed its cloud service to support the growth of its online stores, but as it turned out, there was a huge market for this service outside the company. Amazon Web Services now generates $103 billion in annual revenue.
Profitable growth from the cloud and recent efforts to cut costs helped Amazon generate $50 billion in net income last year. Its continued investment in new fulfillment centers and artificial intelligence capabilities shows that there are still huge opportunities to grow and reward Amazon’s investors for many years to come.
Have you ever felt like you missed out on buying the best performing stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation to companies that they think will fail soon. If you’re worried that you’ve already missed an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1000 when we doubled in 2009you would have $346,349!*
Apple: if you invested $1000 when we doubled in 2008. you would have $43,229!*
Netflix: if you invested $1000 when we doubled in 2004 you would have $454,283!*
Right now we are issuing “Double Dip” alerts for three amazing companies and there may not be another opportunity like this anytime soon.
American Express is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has no position in any of the listed stocks. The Motley Fool has positions and recommends Amazon, Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
