Berkshire Hathaway Inc. (BRK.A) increased its holdings of Amazon.com Inc. (AMZN) stock by 11% in 2Q 2019, according to Berkshire’s SEC Form 13F filed on Aug. 14, as reported by CNBC. As of June 30, Berkshire held 537,300 Amazon shares, which were worth $947 million when priced at the market close on Aug. 14. Put in larger perspectives, this stake represents slightly more than 0.1% of Amazon’s shares outstanding and a bit less than 0.2% of Berkshire’s market capitalization.
Significance for Investors
Two days before Berkshire’s annual meeting on May 4, CEO Warren Buffett surprised investors by revealing that his company had added Amazon.com to its equity investment portfolio. Given Amazon’s very high valuation and worries about its ability to sustain a high rate of growth far into the future, this was a surprising move for the noted value investor. Amazon currently has a trailing P/E ratio of 73 times last 12 months earnings, and a forward P/E ratio of 53 times projected next 12 months earnings, per Yahoo Finance.
“Yeah, I’ve been a fan [of Amazon CEO Jeff Bezos], and I’ve been an idiot for not buying [Amazon shares previously],” Buffett told CNBC on May 2. In 2018, he had this to say about Amazon on CNBC: “[It] far surpassed anything I would have dreamt could have been done. Because, if I really felt it could have been done, I should have bought it. I had no idea that it had the potential. I blew it.”
However, Buffett added in his May 2 interview that “one of the fellows in the office that manage money” was completely responsible for this investment decision. At the annual meeting, Buffett responded to a question about Amazon by saying, “I can assure you both managers–and one of them bought some Amazon stock in the last quarter–he is a value investor.” Either Todd Combs or Ted Weschler, each of whom manage about $13 billion of equity investments for Berkshire, is most likely the person who has been buying Amazon shares, CNBC says.
Amazon stock is up by 17.4% year-to-date through the close on Aug. 14. By comparison, the S&P 500 Index (SPX) has gained 13.3%, while Berkshire is down by 3.6%.
Responding to the question at Berkshire’s annual meeting about the Amazon investment, Buffett also said, “They [the fellows in the office that manage money] are looking for things that they feel they understand what will be developed by the business between now and Judgment Day.” The implication is that these investment managers at Berkshire are indeed confident that Amazon still has significant potential for continued rapid growth in the long term.