Here's the 1 Warren Buffett Stock Most Likely to Join Apple and Microsoft in the $2 Trillion Club
The bigger the better? Warren Buffett seems to think so. He filled Berkshire Hathaway's (NYSE: BRK.A ) (NYSE: BRK.B ) portfolio with large-cap stocks. Nine of the more than 50 stocks Berkshire Hathaway owns are mega-caps with market capitalizations of $200 billion or more.
There are only two US publicly traded stocks with market capitalizations over $2 trillion: Apple (NASDAQ: AAPL ) and Microsoft (NASDAQ: MSFT ). Berkshire has a huge position in Apple, but has never directly owned Microsoft stock. But don't be surprised if another member of the $2 trillion club appears in Berkshire's portfolio in the not-too-distant future. Here's one Buffett stock most likely to join Apple and Microsoft.
It's actually easy to figure out which stock in Berkshire's portfolio is the best candidate to join the $2 trillion club. There are only three US publicly traded stocks other than Apple and Microsoft with market capitalizations over $1 trillion. Buffett owns only one of them — Amazon (NASDAQ: AMZN ). Alphabet (NASDAQ: GOOG ) (NASDAQ: GOOGL ) is much closer to hitting the $2 trillion mark with a market cap of over $1.6 trillion. Although Buffett expressed regret for not buying the stock years ago, he never pulled the trigger.
Nvidia (NASDAQ: NVDA ) is another stock with a market capitalization of more than $1 trillion. But the chipmaker's stock is trading at a whopping 56.5 times forward earnings. I think hell would freeze over before Buffett bought a stock at this valuation.
How Amazon can get to $2 trillion
With a market cap currently approaching $1.43 trillion, Amazon stock would need to rise another 40% to reach the $2 trillion mark. I don't see that happening in the near future, given that it has already soared to around 65% in 2023.
However, if we extend the horizon by a few years, I think Amazon could easily join Apple and Microsoft in the $2 trillion club. There are two main ways I can imagine this scenario playing out. Most importantly, I expect Amazon Web Services (AWS) to gain significant momentum. The cloud services unit has seen a slump in growth over the past few quarters. However, the growing adoption of artificial intelligence (AI) should be a major catalyst for AWS.
In particular, AWS has a huge opportunity in generative AI. Amazon CEO Andy Jassy said on the company's Q2 call, "We think AWS is poised to be a long-term partner for customers in generative artificial intelligence."
The second way I predict Amazon will grow to a market cap of $2 trillion or more is by increasing its profitability. Over the years, investors have learned to more or less shrug off the company's relatively paltry earnings. But I suspect the sharp increase in profits could turn some heads.
Amazon is already making progress in this area. For example, its net income more than doubled to $6.7 billion in the second quarter. In the Q2 call, Jassy noted that the company's "profitability trajectory" has improved significantly over the past year. He added: "We really like where it's going and we're expanding it meaningfully."Will Buffett Win Big?Will Buffett win in a big way if Amazon actually becomes part of the exclusive $2 trillion club? Yes and no.
Berkshire currently owns just over 10.5 million Amazon shares. If Amazon shares jump another 40% to reach a market cap of $2 trillion, the value of Berkshire's position would increase by just under $600 million. That's a lot of money, of course. However, it is nowhere near enough to move the needle much for the giant conglomerate.Perhaps Buffett will boost Berkshire's position in Amazon in the coming quarters. When it comes to owning a stake in Amazon, I think bigger might actually be better.
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Suzanne Frey, CEO of Alphabet, is a board member of The Motley Fool. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is on the board of The Motley Fool. Keith Speights has positions in Alphabet, Amazon.com, Apple, Berkshire Hathaway and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Berkshire Hathaway, Microsoft and Nvidia. The Motley Fool has a disclosure policy.
In the ever-evolving world of investing, few names carry as much weight as Warren Buffett. Known for its thoughtful investment strategies and decades of history, the Oracle of Omaha has made Berkshire Hathaway a household name. Tech giants Apple and Microsoft are reaching unprecedented milestones by crossing the $2 trillion mark, and investors are looking to identify the next contender poised for such greatness. Could it be a Warren Buffett portfolio company?
In recent years, Apple and Microsoft have rewritten the rules of market valuation. Their relentless innovation, global reach and diversified revenue streams have catapulted them into an elite club that only a few companies can join: the $2 trillion club. The impact of this achievement goes far beyond a mere numerical milestone; it reflects the culmination of years of visionary leadership and strategic decision-making.
The Berkshire Hathaway Advantage: A Closer Look at Buffett's Holdings
Berkshire Hathaway, the conglomerate led by Warren Buffett, boasts a diverse portfolio of companies from various industries. While Buffett is known for his value investing philosophy, it is interesting to examine whether any of his holdings have the potential to follow in the footsteps of Apple and Microsoft.
One standout candidate is a firm that aligns with the principles Buffett emphasized throughout his storied career. With solid profitability results, a strong competitive moat, and a management team focused on creating long-term value, it ticks many of the boxes that have made Apple and Microsoft such resounding successes.
Ingredients to join the $2 Trillion ClubTo truly understand the potential of entering the coveted $2 trillion club, it's necessary to break down the factors that led Apple and Microsoft to this remarkable valuation. These factors include:
Innovation: Both Apple and Microsoft are constantly pushing the boundaries of innovation. Whether it's game-changing hardware or revolutionary software solutions, they've redefined their respective industries. demonstrates a similar commitment to innovation with specific examples of recent innovations or product launches.
Global Dominance: A key aspect of Apple and Microsoft's success is their global footprint. Their products and services are used and recognized worldwide. continues to expand its reach, gain market share and demonstrate potential for continued international growth.Financial performance: Companies in the $2 trillion club must show solid financial results. Apple and Microsoft consistently achieve impressive sales and profitability numbers. has shown steady financial growth that exceeds industry standards.
The way forward: Potential challenges and opportunities
While it has many qualities that match the success stories of Apple and Microsoft, it's important to acknowledge the challenges it may face on its way to the $2 trillion club. Factors such as [potential challenges, eg competition, market volatility] could affect its trajectory. However, these challenges often represent opportunities for growth and adaptation, areas where has historically demonstrated resilience.
A Berkshire Hathaway gem ready to shine?
While it's impossible to predict the future of any company with absolute certainty, the company, embedded in Warren Buffett's Berkshire Hathaway portfolio, exhibits characteristics that make it a compelling contender for the $2 trillion club. With innovation as a driving force, an ever-expanding global presence, and solid financial performance, it could very well become the next breakout star in the investment world, joining the ranks of Apple and Microsoft.
Investors would be wise to keep a close eye on its developments, as the journey from a well-regarded Berkshire Hathaway holding to a $2 trillion powerhouse could be the investment story of the decade.
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