HomeMarket NewsUnveiling the Allure of Two Phenomenal Stocks Embraced by Warren Buffett

Unveiling the Allure of Two Phenomenal Stocks Embraced by Warren Buffett

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Berkshire Hathaway helmsman, Warren Buffett, has enjoyed immense success in the investing realm by cherry-picking outstanding businesses fortified with formidable competitive edges. To put this legendary investor’s prowess into context, envision this: if you had invested $1,000 in Berkshire shares when Buffett took the reins as CEO back in May 1965, today you would be sitting on a goldmine worth around $34.3 million.

Granted, with Berkshire’s current behemoth size – sporting a market cap of $889 billion, making it the eighth most valuable company globally – replicating such feats seems a Herculean task. Achieving exponential growth at this stage is a different ball game altogether.

However, gleaning insights from Buffett’s investment playbook still presents a lucrative opportunity to secure market-beating returns. Two astute minds from Motley Fool are convinced that hitching a ride on the Oracle of Omaha’s selections for the two stocks highlighted below could be a game-changer for your investment portfolio.

Warren Buffett.

Image source: The Motley Fool.

A Bright Future Awaits with Amazon Riding the AI Wave

Keith Noonan’s insight on Amazon (NASDAQ: AMZN) underscores its position as the world’s premier online retail giant, while simultaneously leading the pack in providing cloud infrastructure services.

Although Amazon’s e-commerce sector contributes significantly to its revenue stream, it surprisingly does not generate the lion’s share of its profits, thanks to the high operational costs that mar its profit margin. The real profit powerhouse lies in Amazon Web Services (AWS), responsible for approximately 67% of the company’s $36.9 billion operating income last year.

As Amazon capitalizes on economies of scale, coupled with cutting-edge technologies, it stands poised to significantly ramp up profit margins in its e-commerce segment. The broader adoption of artificial intelligence (AI) represents a monumental growth catalyst for this already standout entity.

The integration of AI is set to revolutionize operations in Amazon’s warehouses, potentially heralding a new era of automation, self-driving vehicles, and autonomous delivery technologies. These innovations could translate into a substantial reduction in Amazon’s e-commerce operating costs, thereby catapulting its profits to stratospheric heights.

Moreover, the burgeoning demand for AI is currently propelling AWS to remarkable heights, as AI applications leveraging the company’s cloud infrastructure gain traction. The resultant uptick in application creation and usage spells sustained growth in the demand for said cloud infrastructure.

For the discerning long-term investor on the hunt for AI-driven growth stocks offering an enticing risk-reward proposition, Amazon stands as a beacon of promise beckoning a fantastic buy at this juncture.

Coca-Cola: Where Iconic Brand Loyalty Meets Lucrative Returns

Parkev Tatevosian’s profound perspective on Coca-Cola (NYSE: KO) revolves around the criterion that for a stock to merit consideration as a no-brainer investment, it must exude a sense of durability that can stand the test of time – at least two more decades in this case. Coca-Cola happens to check all these boxes effortlessly.

In 2023 alone, Coca-Cola boasted total revenues of $45.7 billion, complemented by an operating income of $13 billion. Delving deeper, this translates to a refreshing 28.4% operating profit margin after factoring in the costs entailed in pampering consumers with their beloved beverages.

This proven ability to rake in billions in sales at lucrative profit margins serves as a major reassurance for investors wary of the inherent risks associated with investing. Undoubtedly, it is this torrent of annual profits that charmed Buffett into Coca-Cola stock, with the bedrock being adept management, steadfast consumer brand allegiance, and unwavering consumption practices.

KO PE Ratio (Forward 1y) Chart

KO PE Ratio (Forward 1y) data by YCharts.

Willing to fork out a tad more to invest in enterprises like Coca-Cola that boast a high likelihood of standing the test of time seems like a prudent decision. On the upside, Coca-Cola’s valuation currently sits at a reasonable forward price-to-earnings ratio of 20, with the stock cruising at the lower end of its historical trading range over recent years. Investors shelling out for Coca-Cola shares today can plausibly anticipate handsome returns two to three decades down the line.

Would it be wise to plunk down $1,000 in Amazon right now?

Before taking the plunge into Amazon stock, it’s prudent to pause and consider:

The Motley Fool Stock Advisor analyst squad recently pinpointed what they believe to be the top 10 stocks ripe for investors to snap up at the moment… with Amazon missing the cut. These 10 stocks identified are poised to deliver standout returns in the foreseeable future.

Stock Advisor equips investors with a clear roadmap to success, armed with navigational cues for constructing a robust portfolio, regular inputs from analysts, and two fresh stock picks each month. Since 2002, the Stock Advisor service has trounced the S&P 500 return by over threefold*.

Peek at the 10 stocks

*Stock Advisor returns as of February 26, 2024

John Mackey, erstwhile CEO of Whole Foods Market, an Amazon offshoot, sits on The Motley Fool’s board of directors. Keith Noonan holds no positions in any of the stocks cited. Parkev Tatevosian, CFA, similarly does not hold any positions in the mentioned stocks. The Motley Fool has stakes in and commends Amazon and Berkshire Hathaway. The Motley Fool upholds a disclosure policy.

The views and opinions articulated in this article are those of the author and do not necessarily mirror those of Nasdaq, Inc.

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