Berkshire Hathaway CEO Warren Buffett’s strategy of buying and holding quality companies has paid off well over the years, as illustrated by the fantastic returns of Berkshire’s Class A shares over the past decade.
Buffett’s investment strategy has seen Berkshire Hathaway stock nearly triple over the past decade, with gains of 198%, outperforming the stock S&P500Appreciation of 148%. Given his solid track record, it’s not surprising that Buffett’s holdings are closely followed by investors and analysts.
So if you’re new to investing and have $300 in capital, or if you’re carrying excess cash after paying off high-interest debt, paying off expenses, and saving enough for a rainy day, you might want to consider the following Companies Buffett’s Berkshire has an interest in.
Amazon
share prices of Amazon (AMZN 3.99%) are up 10% so far in 2023, but investors can still buy them at a relatively attractive valuation. The tech giant’s price-to-sales multiple of 1.8 means it is discounted to the S&P 500’s selling multiple of 2.25. With Buffett’s philosophy of value investing focused on buying solid companies with healthy long-term prospects and earnings growth potential at cheap valuations, buying Amazon seems like a no-brainer right now.
It’s worth noting that Buffett first bought Amazon stock in the first quarter of 2019. The stock was trading at a relatively expensive 3.8 times sales at the end of the first quarter of 2019, meaning investors can now buy this Buffett stock for a cheaper price than what the Oracle of Omaha paid four years ago .
From e-commerce to cloud computing to digital advertising, Amazon has a diverse array of growth drivers. It’s the second largest e-commerce company in the world, accounting for 13% of the world’s online gross merchandise volume (GMV). This puts Amazon in a good position to capitalize on the secular growth of e-commerce, which is expected to generate $6.3 trillion in revenue this year, up 10.4% from 2022.
The global e-commerce market is expected to grow in the high single digits by 2026 and account for 24% of total retail sales, suggesting it could continue to grow for a long time to come if e-commerce adoption picks up improved.
Meanwhile, cloud computing will be another key growth driver for Amazon, as the company controls nearly a third of that market. Amazon may be seeing a slowdown in this market recently due to tight customer spending, but investors shouldn’t miss the bigger picture. Mordor Intelligence estimates that the cloud infrastructure services market could grow at 19% annually through 2028, driven by an increase in data consumption and increasing adoption of cloud-based services. This should pave the way for continued growth at Amazon Web Services (AWS), a segment that generated $80 billion in revenue last year and grew 29% year over year.
These catalysts show why Amazon’s earnings are expected to grow at a solid pace in 2023 and beyond after posting a $0.27 per share loss last year.
AMZN EPS estimates for current fiscal year data from YCharts
Investors looking to buy an e-commerce stock in which Buffett’s Berkshire has a stake should immediately consider a long position in Amazon given the cheap valuation at which it’s trading. Also, buying Amazon stock and holding it for a long time could help greatly multiply even a small amount like $300. For example, a $300 investment in Amazon a decade ago is now worth over $2,100. Of course, past performance isn’t indicative of future performance, but the company’s numerous catalysts could give the stock a nice boost and increase investor wealth going forward.
floor & decor
Floor and decor stocks (FND 2.06%) Stock has been in good shape in the market this year, up over 27% so far thanks to the company’s impressive fourth-quarter 2022 results, released on February 23. Tile, Wood & Laminate, and Wall Tile finished the year with a 24% increase in revenue to $4.26 billion.
The impressive growth was driven by a combination of new store openings and an increase in comparable store sales. Floor & Decor opened 32 new warehouses last year while one closed. It also opened four design studios. Meanwhile, the company’s comparable-store sales (which refers to sales from stores that have been open for more than 12 months) rose 9.2%. Floor & Decor also posted a 13% increase in adjusted earnings for the year to $2.76 per share.
However, the company’s outlook for 2023 doesn’t look good at first glance. Floor & Decor expects 2023 sales of $4.68 billion at the midpoint of its guidance range, which would represent a 9.5% increase year over year. Additionally, comparable-store sales are expected to decline 1.5% at the midpoint, while analysts expect adjusted earnings to fall to $2.71 per share. It’s worth noting that the company expects a balmy year despite its plan to open 32-35 new warehouses.
Floor & Decor’s cautious guidance for 2023 is due to sharp declines in existing home sales due to rising mortgage rates. The National Association of Realtors expects existing home sales to fall 6.8% to 4.78 million this year, and Floor & Decor management believes that will weigh on the company’s sales growth. The company will resort to price cuts to get its products to market, and that will negatively impact in-store comparable sales growth.
However, analysts expect the company’s growth to pick up next year.
FND sales estimates for current fiscal year data from YCharts
That’s not surprising, since Floor & Decor estimates that it has a total addressable market worth $49 billion to $54 billion. The U.S. hard flooring market alone is expected to generate nearly $20 billion in revenue next year as customers move away from soft floor coverings like carpets. This bodes well for Floor & Decor as it leads the hard floor market with a 57% share. Also of note is that the company’s share of this market increased by 13 percentage points from 2012 to 2021.
That explains why Buffett’s Berkshire has gradually increased its stake in Floor & Decor over the past several years. Berkshire first took a stake in Floor & Decor in the third quarter of 2021, buying 817,000 shares of the specialty retailer. It increased its stake over the next few quarters and now holds 4.78 million shares, accounting for a 4.5% stake.
Now Floor & Decor should be able to maintain healthy growth rates over the long term thanks to its solid market share and the good health of the industry in which it operates. That’s why savvy investors might want to buy this Buffett stock before too late. It’s trading at an attractive 2.2x sales even after an impressive rally in 2023, giving investors a good entry point into a company that has seen a $300 investment in $880 since its IPO in April 2017. turned dollars.
