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Two of the hottest investors on Wall Street are Warren Buffett and Cathie Wood. However, these two people don’t have much in common.
Buffett has made billions of dollars by sticking to a relatively simple investment strategy: looking for companies that generate strong, stable cash flow and build the best brands. Much of Buffett’s portfolio is berkshire hathaway It focuses on sectors such as consumer goods, financial services, telecommunications, and energy. Meanwhile, Wood’s Ark Invest portfolio is made up of growth stocks in emerging fields such as artificial intelligence (AI), genomics and cryptocurrencies.
Despite their vastly different approaches to investing, Wood and Buffett both own shares in the Magnificent Seven. Amazon (NASDAQ:AMZN). Amazon is best known for its online store, but it’s also home to a major cloud computing operation and is starting to branch out into streaming, entertainment, and advertising.
The stock is up more than 70% in the last year, and one Wall Street analyst sees more room for growth. Evercore ISI’s Mark Mahaney has a price target of $220 for Amazon stock, which would represent an increase of about 26% from Thursday’s closing price.
A deep dive into Amazon’s business to understand how the company was able to attract two of Wall Street’s most prominent investors and why the company has more room to run. Sho.
How much Amazon stock do Wood and Buffett own?
Although Woods and Buffett both have Amazon stock in their portfolios, it’s important to understand that Amazon is a relatively small position for both investors.
Buffett owns about $1.5 billion in Amazon stock, which is only about 0.44% of Berkshire’s total portfolio. Similarly, Wood’s position in Amazon is in just one of her exchange-traded funds, and the company represents just 0.06% of the fund.
I’m not interested in the details of Amazon’s weighting relative to other holdings for either investor. Wood likely sees Amazon as a hedge against other technology investments in small businesses. Meanwhile, Omaha’s Oracle has long shied away from the tech sector in general, so it’s not entirely surprising that it has such a small allocation to a company like Amazon.
AI could boost Amazon’s overall business
One of the things that makes Amazon so unique is that it operates across a wide range of end markets. E-commerce and cloud computing are the company’s main growth drivers. But the company’s Amazon Prime subscription service provides customers with access to media such as movies and TV shows, and its $47 billion advertising business is quickly becoming a major force in the company’s ecosystem. there is.
Providing investors with a deep level of diversification is only part of Amazon’s value proposition. On a deeper level, advances in AI could drive growth across Amazon’s business. The company’s multibillion-dollar investment in OpenAI competitor Anthropic in September could be key to unlocking new synergies at Amazon Web Services (AWS). Additionally, the use cases surrounding generative AI are exploding and could take Amazon’s e-commerce and advertising segments to a new level.
Amazon stock has room to operate
Mahaney’s bullish stance on Amazon isn’t just about the company’s ability to generate strong revenue. In fact, the investments Amazon is making across its platform should lead to significant profit growth over the long term. As such, the company should be able to generate strong and sustainable cash flow that can be used to reinvest in other growth areas.
I agree with Mahaney’s view that revenue recovery and cash flow acceleration seem achievable as AI becomes a pillar of the next phase of Amazon’s evolution.
Investors appear to be underestimating Amazon’s potential to emerge as an AI leader. With a sales multiple of just 3.1x, Amazon stock trades at the largest discount of the Magnificent Seven based on this metric. Investors have the opportunity to scoop up stock at a deep discount compared to Amazon’s giant stock.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Adam Spatako has a position at Amazon. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Cathie Wood and Warren Buffett each own this artificial intelligence (AI) stock. 1 Wall Street analyst believes the stock could rise 26% on his.Originally published by The Motley Fool
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