What do Warren Buffett, Jeff Bezos, David Tepper, Ken Griffin, Israel Englander and Philipe Laffont have in common? Well, two things. First, they are all Billionaires. Second, they all have some growth potential.
Now, I’m not surprised that these rich – and smart – individuals own this particular stock. Looking ahead, it seems to have tremendous potential. I believe it has so much potential that I’ve made it my largest portfolio position.
A world-class growth stock
The stock I am referring to is Amazon (NASDAQ: AMZN), which is listed in the US.
You may think that Amazon is an online shopping giant. But Amazon is much more than that. Today, Amazon is one of the world’s largest providers of cloud computing services with its Amazon Web Services (AWS) platform.
It is now also one of the world’s largest companies in digital advertising (a very lucrative industry).
The company is also active in a number of other high-growth industries, including artificial intelligence (AI), self-driving cars and satellite broadband.
Overall, it is a animal of a company. And although the company has been around for several decades, in my opinion it is still in its early stages.
Why I’m “all-in” on Amazon
There are several reasons why I have made it my largest holding. One is that the company’s earnings are soaring thanks to the efficiency improvements of CEO Andy Jassy. Earnings per share are expected to grow by about 57% this year. That is the second highest growth among the “Magnificent Seven” companies (behind NVIDIA).
Another reason is that the company’s valuation is near historic lows. And currently, the price-earnings-growth (PEG) ratio is below one. Such a low ratio generally indicates that a stock bargain.
A third reason is that the stock has lagged other Big Tech stocks in recent years, rising only about 10% over the past three years, compared to nearly 70% over the previous three years. Microsoft. So I think there is a lot of catching up to do here.
Finally, the chart below looks fantastic. Currently, Amazon’s share price is in a strong uptrend. And recently it reached new all-time highs (which can be a very bullish signal).
Investing with billionaires
Of course, there are also many risks. Competition from other technology companies is one of them. In the area of cloud computing, the company competes against Microsoft and alphabetWhen it comes to online shopping, the company is facing competition from new competitors such as Temu.
Valuation is also a risk. While the PEG ratio is below one, the P/E ratio is still high at 44. That doesn’t leave much room for error. If growth slows, the stock could fall.
However, I’m encouraged by the fact that a ton of super-smart billionaires own it, so I’m betting it will continue to rise in the months and years to come.
The post “Billionaires are betting on this growth stock. Me too!” first appeared on The Motley Fool UK.
Further reading
Ed Sheldon holds positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool UK has recommended Alphabet, Amazon, Microsoft, and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Views on companies mentioned in this article are those of the author and as such may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2024
