Warren Buffett: 3 Tech Stocks Part of Berkshire Hathaway’s Portfolio
August 23 2021 - 6:15AM
Finscreener.org
One of the world’s most popular investors, Warren Buffett, has
built massive wealth over the last several decades by focusing on
buying and holding value stocks. Earlier, the Oracle of Omaha
avoided investing in technology stocks as Buffett claimed he did
not understand the sector well enough.
However, over the last few years, Warren Buffett’s Berkshire
Hathaway (NYSE: BRK.A)(NYSE:
BRK.B)
has added several tech stocks to its investment portfolio. Here, we
take a look at three top tech stocks that are part of Berkshire
Hatchway’s portfolio right now.
Apple Inc.
The first stock on my list is the multi-trillion-dollar company
Apple Inc (NASDAQ: AAPL).
Berkshire initially invested $1 billion in Apple shares back in
2016 and has continued to increase its holdings in the tech giant.
By the end of 2020, Berkshire’s Apple portfolio was worth $120
billion, accounting for 5% of the hardware heavyweight’s total
market cap.
Apple has in fact generated close to $90 billion in unrealized
profits and accounts for more than 50% of Berkshire’s total
portfolio. Despite its massive size, Apple continues to grow at a
robust pace. The company increased sales by 36% year over year in
the quarter ended in June while iPhone sales surged over 50%.
Apple continues to successfully diversify its revenue base.
While the iPhone is still its largest business, the Services
segment is firing on all cylinders. The tech giant also has
multiple subscription products including Apple Care, Apple TV+,
Apple Music, and Apple Arcade.
Analysts tracking the stock expect Apple sales to rise from $274
billion in fiscal 2020 to $366 billion in 2021 and $380 billion in
2022. Comparatively, its adjusted earnings per share are forecast
to rise at an annual rate of 19.6% in the next five years.
Wall Street has a 12-month average price target of $166 for
Apple stock which is 12% above its current trading price.
Amazon Inc.
One of the top-performing stocks on the S&P 500, Amazon
(NASDAQ: AMZN)
is also part of Warren Buffett’s portfolio. AMZN stock has returned
1,540% in the last 10 years and has significant upside potential
given its part of several rapidly expanding addressable markets
including e-commerce, cloud computing, online streaming, and
digital advertising.
Amazon stock was
one of the best performers amid COVID-19 as the pandemic acted
as a tailwind for several of the company’s businesses. The shift
towards e-commerce shopping accelerated at a fast pace as did the
demand for streaming services. In fact, the number of Amazon Prime
subscribers rose from 150 million to 200 million in the last year.
Amazon’s ad sales growth also increased at a rapid pace in each of
the last four quarters.
While the e-commerce segment rakes in the majority of its sales,
Amazon Web Services is the company’s most profitable business. AWS
generated $14.8 billion in revenue in Q2 while its operating profit
stood at $4.2 billion, indicating a margin of 28%. Its overall
operating margin was much lower at just 6.8%.
Snowflake
The final stock on this list is Snowflake (NYSE: SNOW)
and Berkshire subscribed to its IPO in late 2020. Snowflake has
risen 140% since its IPO which means Berkshire Hathaway holds close
to $2 billion of the company’s stock. Despite its impressive
returns, Snowflake is also trading 28% below record highs providing
investors an opportunity to buy the dip.
Snowflake has grown its sales from $96.66 million in fiscal 2019
to $592 million in fiscal 2021 ended in January. Analysts expect
sales to rise 88% year over year to $1.11 billion in 2022 by 64% to
$1.83 billion in 2023. This will allow it to narrow losses from
$1.56 per share in 2021 to $0.5 per share in 2022. It means that
the stock is valued at a market cap of forwarding sales multiple of
70x which is still very steep.
In the first quarter of fiscal 2022, the company’s revenue was
up 110% to $229 million. The number of customers also rose by 67%
to 4,532 while its net retention rate was also exceptional at
168%.
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