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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Berkshire Hathaway recently announced a new position in Amazon.com (NASDAQ: AMZN) and added to his participation in JPMorgan Chase (NYSE: JPM). & nbsp; Here is why both actions seem to be very good shopping today. "data-reactid =" 12 "> Berkshire Hathaway recently announced a new position in Amazon.com (NASDAQ: AMZN) and added to his participation in JPMorgan Chase (NYSE: JPM). Here is why both actions seem to be good shopping today.
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Buffett loves the high-flying retailer
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Warren Buffett and Berkshire Hathaway Vice President, Charlie Munger, have praised the CEO of Amazon, Jeff Bezos, in recent years. </ P> <p> Buffett said that he had missed the mark on Amazon, but according to Munger, he was not too late. told CNBC "Amazon is" a phenomenon of nature "and the company still has a long track of growth." data-reactid = "26"> Warren Buffett and Berkshire Hathaway Vice President Charlie Munger have praised Amazon CEO Jeff Bezos in recent years. Buffett said he had missed the boat on Amazon, but according to Munger, it's not too late. At the beginning of the year, Munger told CNBC that "Amazon" is a natural phenomenon "and that the company has a long track of growth.
Amazon continues to report strong growth rates even though it is one of the largest companies in the world. The online retail giant increased revenues 17% over the first quarter. This is a deceleration from previous quarters, but an impressive growth rate for a company that has generated a turnover of $ 241 billion over the past year.
Berkshire Hathaway held 483,300 shares of Amazon as of March 31, 2019, which would represent $ 834 million at current prices. However, it was not Buffett, but one of two investment managers who oversees a small portion of the Berkshire stock portfolio that made the decision to buy Amazon shares. Buffett agrees, saying the decision was made with the same approach to value that the Oracle of Omaha has practiced throughout his career.
So, how is Amazon a market value with a final P / E of 72? On the one hand, Amazon typically generates a lot more cash from operations than its reported earnings. Over the past year, the company generated free cash flow of $ 23 billion, compared to net income of only $ 12 billion. Thus, stocks are trading at a price / FCF ratio of 37 – not as expensive as its P / E would let you believe.
Secondly, Amazon Web Services is growing very fast, with sales up 41% over last quarter. More importantly, AWS accounted for 50% of the company's operating income in the first quarter. Amazon also has a strong growth advertising activity included in its "other" sales category, in which sales increased 34% from the first quarter.
<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "At least two analysts have pointed out that investors are undervalue The core business of Amazon's retail business after removing the value of AWS and advertising. & Nbsp; It is likely that Berkshire Hathaway value gurus will see the same value at Amazon and are ready for the challenge. "Data-reactid =" 31 "> Last year, they pointed out that investors were undervaluing the main business of Amazon's retail business after removing the AWS value and advertising It is likely that value gurus at Berkshire Hathaway are seeing the same value at Amazon and have stepped up their efforts.
One of Buffett's favorite bank securities is on sale
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This is no secret to anybody Buffett is a big fan of bank stocks. & nbsp; Berkshire has several, including Wells Fargo, US Bancorp, and M & T Bank, to name just a few, with JPMorgan being Berkshire's second-largest bank share. In the last quarter, Berkshire Hathaway increased its holdings in the stock and now holds 59,514,932 shares of JPMorgan, valued at approximately $ 6.5 billion at current prices. "Data-reactid =" 33 "> It's no secret that Buffett is a big fan of banking stocks, Berkshire owns several, including Wells Fargo, US Bancorp, and M & T Bank, to name just a few, with JPMorgan being Berkshire's second largest holding company. During the last quarter, Berkshire Hathaway increased its stake in the stock and now holds 59,514,932 shares of JPMorgan, valued at approximately $ 6.5 billion at current prices.
Warren Buffett is an admirer of JPMorgan CEO Jamie Dimon and clearly thinks the bank's stock is cheap at current prices. JPMorgan has a strong history of earnings growth. Last year, the bank's return on tangible capital was 17%, the best among the major US banks.
Dimon estimates that the company can continue to earn more than 15% of its tangible equity if it continues to invest profitably in areas conducive to growth. An opportunity opens 400 new branches over the next few years.
The most important benefit for JPMorgan, besides having a mind like Dimon's, is its size. The company is the largest bank in the United States with $ 2.74 billion in balance sheet assets. It is also a leader in the consumer services and investment banking market.
Size can sometimes cause problems for banks, as we saw during the Great Recession of 2008. But even during this tumultuous year, JPMorgan still managed to generate a profit of 5.6 billion dollars , which says a lot about the bank's risk management culture – Buffett certainly took note of this achievement.
Since 2004, the tangible book value of the bank has risen from $ 15.35 per share to $ 56.33 in 2018. The stock price has followed this rise, recording an increase of 309%, including dividends, most of which has been recorded in recent years.
<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The stock is currently trading at 10.9 times earnings this year's accounting estimates and about twice the tangible book value. & nbsp; However, Buffett thinks the stock should trade up. three times the tangible equity. If he's right, it means that JPMorgan could be worth 50% more than the current price of the stock, at $ 110.16 per share. "Data-reactid =" 43 "> The stock is currently trading at 10.9 times this year's earnings guidance and about twice as much tangible results.Buffett thinks the stock should trade against actions three times more tangible, which means that JPMorgan could be worth 50% more than the current price of $ 110.16 per share.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 44 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. John Ballard owns shares of Amazon. Motley Fool owns shares and recommends Amazon and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy."data-reactid =" 52 ">John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. John Ballard owns shares in Amazon. Motley Fool owns shares and recommends Amazon and Berkshire Hathaway (B shares). Motley Fool has a disclosure policy.
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