Warren Buffett plans to retire this year after delivering a return of over 5,000,000% to long-term investors through his holding company Berkshire Hathaway. With a market capitalization of $1.12 trillion, Berkshire is already quite large, so investors shouldn’t expect a repeat of the previous six decades of growth.
That said, the portfolio is still a great way to look for inspiration in the market. Let’s discuss why two Berkshire-backed stocks, Amazon (AMZN 0.55%) and BYD (OTC: BYDD.F), could make great buys.
Amazon
Even the best investors make mistakes. Warren Buffett has admitted that he was “too dumb” to see Amazon’s potential earlier. But he finally took the plunge in early 2019, and now Berkshire Hathaway owns a whopping $1.89 billion of the company’s shares, representing 0.7% of its portfolio.
It’s easy to see why Buffett likes Amazon. The company’s economic moat is as deep as they come. Its size creates a positive feedback loop: the vast number of buyers attracts more sellers, which leads to more competition and product variety. The company can also unlock economies of scale in its logistics and distribution networks, passing on these savings and efficiencies to consumers.
While Amazon could face some challenges from the Trump administration’s new tariffs on imported goods, its 3rd party business model can shift the impact mostly to sellers on the marketplace.
Amazon’s diversification is another long-term asset. The company’s cloud computing division, Amazon Web Services (AWS), represents around half of operating income, reducing its exposure to consumer spending and allowing it to benefit from long-term growth drivers like generative artificial intelligence (AI). Amazon’s AI strategy focuses on the enterprise side of the industry, helping other companies run and train their models.
BYD
With a $2.68 billion stake, Berkshire Hathaway is one of BYD’s highest-profile backers — first betting on the Chinese EV maker in 2008. Like Amazon, BYD is an excellent example of how forging a deep and sustainable economic moat can be key to a company’s success.
BYD’s edge comes from vertical integration. The company started its life as a battery maker and has leveraged this expertise to control a vast amount of its supply chain — not only making its own batteries, but also having rights to lithium mines and refining capacity needed to create them from scratch. This allows it to bring down costs and quickly scale up production.
In 2024, BYD overtook American rival Tesla to become the top-selling EV brand in the world with revenue of $107 billion.
Image source: Getty Images
While heavy tariffs will likely prevent BYD’s cars from entering the U.S. market any time soon, the company has a massive opportunity for expansion elsewhere in the world. Management aims to double international sales to 800,000 in 2025, avoiding tariffs and other forms of protectionism by manufacturing locally. Tesla’s weakness in the EU could turn into an opportunity for BYD to gain market share.
With a forward price-to-earnings (P/E) multiple of just 21, BYD’s shares are remarkably affordable. For context, Tesla has a forward P/E of 127.
Warren Buffett is holding a record amount of cash
While Amazon and BYD are both relatively important holdings in the Berkshire Hathaway portfolio, they pale in comparison to the company’s cash pile, which stood at a record of $334 billion at the end of 2024 after it sold $134 billion in stocks last year.
Buffett’s defensive posture could signal that he feels cautious about the stock market in general, which makes sense considering the volatility surrounding Trump’s trade policy. While Amazon and BYD remain great long-term buys, investors should also consider diversifying their holdings to minimize risk in this uncertain market.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
