We recently compiled a list of the 8 Best Warren Buffett Stocks to Buy According to Analysts. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other Best Warren Buffett Stocks to Buy.
2024 will go down in history as the year that legendary investor Warren Buffett started showing signs of slowing down after an illustrious career in the investment world. After losing his best friend and longtime partner, Charlie Munger, the Oracle of Omaha increasingly shows signs of relinquishing control of his investment empire.
Even with his investment company becoming the first non-tech giant to hit the $1 trillion mark on market cap, Buffett is slowly relinquishing control after years of tremendous success. Handpicked Greg Abel is now responsible for taking over the Buffett Empire after more than 60 years in the limelight.
READ ALSO: Carl Icahn Stock Portfolio: 7 Best Stocks to Buy and 10 Best Performing Warren Buffett Stocks in 2024.
As Abel assumes control in making key investment decisions, Buffett continues sending shockwaves. Nevertheless, he has become a net seller, having trimmed stakes in some high-profile holdings, all but raising concerns about the market outlook.
At 94, Buffett has seen it all, having outperformed the S&P 500 over the years and generated significant returns for his investors. Since 1965, the billionaire investor has averaged returns of 19.8% through his investment firm, nearly double the 10.2% return of the S&P 500 over the same period. Nevertheless, he appears to have hit the peak of his investment career as he became a net seller after one of the longest bull runs.
The recent sales have taken Buffett’s cash haul to the $300 billion mark, which he can use to purchase a good chunk of the S&P 500 companies. Nevertheless, the billionaire investor has shown reluctance to invest in the cash-sitting valuations that have gotten out of hand.
Since Buffett has yet to carry out a massive investment this year, it does not come as a surprise. The advocate of value investing, which involves analyzing the market for undervalued stocks likely to generate long-term value, has been skeptical about valuations.
His reluctance also comes on outperformance in recent years, becoming extremely difficult due to the sheer size of Buffett’s investment portfolio. “We have no possibility of eye-popping performance” given that “there remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett is quoted as saying in an interview with CNBC.
With the S&P 500 up by more than 20% for the year, Buffett has indicated that the market might be too expensive to pursue opportunities at current levels. Consequently, he has opted to stay in cash while locking in profits through buybacks and dividends in some of his top investment plays.
Nevertheless, the market is still full of some of the best Warren Buffett stocks that analysts see material upside to. In the aftermath of the US Federal Reserve cutting interest rateby 50 basis points and indicating the prospects of further cuts before year-end, opportunities are increasingly emerging around some of Buffett’s top investment plays
Even as Buffett waits for the market to correct to deploy the more than $300 billion at his disposal, there are still opportunities to pursue as interest rates trend down. With that, let’s look at the 8 best Warren Buffett stocks to buy according to analysts.
Our Methodology
To compile the list of the best Warren Buffett stocks to buy according to analysts, we sifted through Berkshire Hathaway’s Q2 2024 13F portfolio. We scanned all the 13F holdings and picked the 8 stocks that had the highest upside potential, as of September 24. We have ranked the stocks in ascending order based on their upside potential.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Amazon.com, Inc. (NASDAQ:AMZN)
Warren Buffett’s Q2 2024 Stake: $1.93 Billion
Analyst Upside Potential, as of September 26: 15.96%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is arguably one of the best Warren Buffett Stocks to buy, according to analysts. It’s a market leader in e-commerce and cloud computing. Additionally, the company’s increased focus on artificial intelligence has made it a firm favorite amid the AI frenzy.
Amazon.com, Inc. (NASDAQ:AMZN)’s entry into the generative AI sector has generated the highest level of excitement for its stock in the last 24 months. Yet, the truth behind this excitement goes beyond mere speculation. Users of Amazon’s AI offerings are discovering real benefits from them. As Amazon continues to pour resources into enhancements and new functionalities, it ought to maintain its leading role in cloud computing and secure a larger portion of the market.
Thanks to the integration of AI features, Amazon.com, Inc. (NASDAQ:AMZN) recorded an 18.8% increase in sales growth in the second quarter under its cloud computing unit, Amazon Web Services. While AI represents one of the biggest catalysts that continue to fuel Amazon’s underlying growth, advertising is also emerging as an important segment.
Amazon.com, Inc. (NASDAQ:AMZN)’s advertising division has been one of its most rapidly expanding areas, experiencing a 20% increase in revenue from the previous year, or a $2 billion rise. It already boasts unparalleled visibility for advertisers looking to reach Amazon shoppers through its sponsored ads on its online shopping site, and its latest feature, an ad-supported Prime video service, is opening up new avenues for both advertisers and Amazon.
The online shopping sector is also showing steady growth, with more units sold than in sales as shoppers look for cheaper deals. Growth in e-commerce and advertising on the cloud should continue diversifying and strengthening Amazon.com, Inc. (NASDAQ:AMZN)’s revenue base, allowing it to generate long-term value.
While the company trades at a premium with a price-to-earnings multiple of 32, it is expected to enjoy robust growth in various segments. Analysts on Wall Street rate the stock as a buy with a $223.25 price target, implying 15.96% upside potential.
Overall, AMZN was held by 308 hedge funds, and Fisher Asset Management was the largest shareholder.
Meridian Hedged Equity Fund mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter. Here is what the firm said:
“Amazon.com, Inc. (NASDAQ:AMZN) is a global technology company that operates e-commerce, cloud computing, digital advertising, and other businesses. We own Amazon because we believe it is well-positioned to benefit from several strong secular trends, including the shift to online shopping, the growth of cloud computing, and the increasing importance of digital advertising. The company exceeded expectations in the first quarter, with cloud-computing revenue growth accelerating, driven by easing cost optimization pressures and the ramp of generative AI workloads. The North American retail segment drove record operating margins, highlighting the success of Amazon’s efforts to improve efficiency and lower its cost to serve. International retail also showed promise, as emerging markets steadily progressed towards profitability. Given the strength across these key segments, we continue to hold the position in the company.”
Overall AMZN ranks 6th on our list of 8 Best Warren Buffett stocks to buy according to analysts. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.