Does Berkshire Hathaway Own Amazon?

Does Berkshire Hathaway Own Amazon? Amazon.com, Inc. (NASDAQ:AMZN) is one of the largest companies in the world, making CEO Jeff Bezos and ex-wife McKenzie Scott its richest man and woman. It grew from a small online bookstore into a technology powerhouse with revenues coming from streaming, e-commerce, cloud computing, and artificial intelligence (AI).

It’s a cash cow business that went public in 1997 at $18 per share. Since then, the stock split three times and traded at over $3,000 per share by Q1 of 2021

Berkshire CEO Warren Buffett was for years notoriously anti-technology stocks. Being from an older generation (born in 1930, he’s a part of the Silent Generation that preceded boomers), and many analysts argued that he didn’t understand technology.

He especially balked at how technology stocks maintained such high P/E ratios compared to some of his more traditional cash flow producing investments. But even the Oracle of Omaha saw the growth potential in Amazon’s business model. That’s why he finally bought into the hype in 2019.

Let’s check the receipts to find out how his bet played out and paid off.

Why Buffett Didn’t Like Technology Stocks

There are two big reasons Buffett didn’t like technology stocks – he’s older than computer technology but old enough to remember the dotcom bubble.

Buffett staunchly believes you should invest in what you know. Instead of trying to read the market and time it, you should look for businesses you understand and can follow. Understand their brand and how they make money, along with their underlying fundamentals.

He mostly buys financial and insurance companies, because he knows they generate cash. But he made exceptions for companies like Costco (COST) and Coca-Cola (KO) with strong products and brands. These investments have something tangible that can be seen in real life.

Technology is a whole other ball game though – the dotcom bubble saw companies rise to massive valuations. Amazon trades for nearly 100 times its earnings. Coke trades under 30 times and Costco trades under 40 times its earnings.

As a seasoned investor, it took Buffett a long time to break out of the tech bubble mindset. When he jumped in, he did so in a big way. Apple is one of Berkshire’s biggest holdings, and its position wasn’t bought until May 2016.

Had he bought into Apple at its 1980 IPO at $22 per share, each one now be worth $16,891 after all the stock splits. It spent $90 billion for its nearly 250 million shares. By 2021, the company held nearly 1 billion shares worth over $129 billion.

Perhaps seeing the lost opportunity, Buffett finally bought into Amazon in 2019.

Why Did Berkshire Buy Amazon?

Berkshire bought into Amazon twice during 2019, but it wasn’t because of Buffett’s advice. Instead, he credits an internal money manager for making both the initial purchase and doubling down later in the year.

The company has two main money managers who each manage $13 billion portfolios for the company. Buffett admires Amazon as a company and even partnered with founder Bezos on a joint health care venture in the 2010s. He assumed he missed the boat on the company though.

Buffett believes in long-term growth, and couldn’t imagine Amazon continuing to grow the way it did in the post-pandemic market of 2020.

Amazon shares crashed to a 52-week low of $1,626.03 during the start of 2020. It reached over $3,500 by the end of the summer before settling in the $3,000 range. This growth gives the company a market capitalization north of $1.5 trillion and added over $100 billion to Bezos’ fortune.

Bloomberg estimates Bezos earned $13 billion in a single day in 2020, while Buffett’s fortune is estimated at $84.6 billion at the start of 2021. He already gave away $41 billion, primarily through the Bill and Melinda Gates Foundation.

Does Berkshire Hathaway Own Amazon?

Berkshire Hathaway owns Amazon shares, but it’s through its investment management branches. The company is not a wholly owned subsidiary of Berkshire, like Geico or Duracell. In fact, Berkshire isn’t even one of the biggest Amazon shareholders.

Bezos is the biggest single shareholder, holding 55.5 million, or 11.1 percent of the company’s outstanding shares. Institutional investors like Advisor Group (7.1 percent) and Vanguard Group (6.6 percent) are the biggest shareholders behind him.

In comparison, the position held by Berkshire is relatively mild. Much of this can be explained by its already inflated price by 2019 versus its IPO price of $18 per share. Instead, it paid between $1,500 and $1,800 for its shares.

That could have been a risky bet, but the coronavirus pandemic accelerated a growth path we were already on.

How Many Shares Of Amazon Does Berkshire Own?

Berkshire has a relatively small stake in Amazon. By August 2019, it owned $537,300 shares worth $947 million. It was a well-timed buy, as the pandemic crash reset its profits to zero before doubling them. That same stake is now worth over $1.9 billion.

And Amazon is a pure growth stock that doesn’t pay dividends, much like Berkshire Hathaway itself. This makes it one of the most unique investments in the firm’s portfolio. It’s a technology stock without a dividend payment.

It’s a sign of how Berkshire will change once Buffett leaves the helm.

Does Berkshire Own Amazon? The Bottom Line

Berkshire Hathaway owns over a billion-dollar stake in Amazon, which isn’t even a notable investment in either company’s portfolio.

Still, it’s impressive to double your money within a year. Typically, it happens with penny stocks, but Buffett did it through one of the biggest companies in the world.

Amazon is a strong e-commerce stock, and selling down his long-time position in Costco shows a changing of the guard. He may be 20 years late to the tech party, but Buffett and his company are finally backing the longevity of technology stocks. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.