Since Warren Buffett bought Amazon (NASDAQ: AMZN) stock for his portfolio in the first half of 2019, it’s had a good run. I estimate Buffett probably paid between $1,700 to $2,000 per share for his first batch of AMZN shares last year. Since then, the share price has risen to $3,100.
Even after this rise, I think Amazon stock is still worth buying. Here, I’ll explain why. I’ll also look at some other slightly cheaper Buffett stocks I believe are worth buying today as well.
Warren Buffett likes Amazon stock. So do I
I’m bullish on Amazon stock for a couple of reasons. The first is that the company is the undisputed leader in the online shopping space. Last quarter alone, it generated $48bn in online sales plus $20bn from third-party sellers. Online shopping is an industry that’s set for huge growth in the years ahead. Globally, e-commerce sales are projected to expand from around $2.4trn this year to $3.5trn by 2025. This means the growth potential in this space remains vast.
The second is that Amazon is the number-one player in the cloud computing market. This is an industry with enormous growth potential. Today, nearly all of the technologies we use are based on cloud technology. Email, online storage (Google Drive etc.), streaming (Netflix, Spotify, etc.), social media, video gaming… all rely on cloud technology. Looking ahead, the cloud computing industry is projected to grow at over 20% per year between 2020 and 2025. Amazon should benefit from this industry growth.
Now, Amazon stock isn’t cheap. Currently, it trades on a forward-looking P/E ratio of 69 using next year’s earnings forecast. That valuation does add risk. However, given the long-term growth potential here, and the company’s dominant market positions, I think the stock deserves such a premium. With the share price down about 10% since the start of September, I think this Buffett stock is a buy today.
Other Buffett stocks I’d buy now
Amazon isn’t the only Buffett stock I see as a buy, however. Looking at the Berkshire Hathaway portfolio, there are a number of stocks I like the look of at present.
Given the expected growth of e-commerce in the years ahead, I’m also very bullish on the payments sector right now. As we buy more goods online, companies that specialise in electronic payments will profit. Two stocks Buffett owns in this space are Mastercard and Visa. I see both as good long-term buys. Neither’s cheap. Mastercard has a forward-looking P/E of 39, while Visa has a P/E of 38. However, the long-term growth potential of these stocks is substantial.
I also think Buffett’s largest holding, Apple, is also worth a look at present. Its share price has pulled back recently. Currently, it trades on a forward-looking P/E ratio of 30. I think that’s quite a reasonable valuation for this dominant technology business. With the company continuing to move into other industries, such as payments and healthcare, I see plenty of potential for future growth.
In a long-term portfolio, I think these other Buffett stocks could complement Amazon stock quite nicely.
