Warren Buffett and Cathie Wood Only Own 1 Stock in Common, and Billionaire Investor Bill Ackman Just Bought It, Too
Warren Buffett, Cathie Wood, and Bill Ackman are three powerhouse investors who each have a different approach to investing.
Warren Buffett is a legend who has outperformed the stock market by a landslide over his years of investing. He's a proponent of value investing, and he typically invests in large, well-established industry giants. He's joked about the average age of the companies he invests in, saying his holding company, Berkshire Hathaway, isn't big on newcomers.
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Cathie Wood's approach is almost diametrically opposite Buffett's. Her company, Ark Invest, buys stocks that are the "leaders, enablers, and beneficiaries of disruptive innovation," and it specifically intends to differ from traditional investing strategies. Ark Invest offers investments through exchange-traded funds (ETFs), and Amazon (NASDAQ: AMZN) has a spot in five of Ark's six actively managed funds.
Image source: Amazon.
Bill Ackman runs hedge fund Pershing Square Capital, which seeks to maximize gains by investing in a concentrated group of large companies. It generally owns only around 10 or so stocks, mostly focused in the consumer products space. Although Ackman doesn't take controlling stakes, he has acted as an activist investor to get companies to make better decisions.
Until recently, Buffett and Wood had two stocks in common before Buffett sold out of Brazil's Nu Holdings. Now they share only one stock in common, Amazon, and Ackman just made it his newest holding, too.
Let's see why Amazon appeals to so many different investing types, and why you might be interested in buying shares, too.
Amazon is the second largest company in the U.S. by sales and the fourth largest by market cap. It is the leader, by far, in two huge, growing industries, giving it an incredible moat and growth opportunities. It's also highly profitable, and it's always investing in new projects and upgrades.
It has around 40% of the e-commerce market, with second-place Walmart far behind. As a technologically robust giant, Amazon has been able to widen its moat by improving its platform with artificial intelligence (AI), robotics, and more. Although e-commerce isn't one of its higher-growth segments, it's growing in the mid-single digits in general, and it accounts for the majority of the company's total sales.
Fear about how tariffs might affect the e-commerce business sent the stock down this year. Management tried to assuage the fears by pointing out that Amazon has a huge product assortment with different sellers that customers could switch to should tariffs raise prices, and that it's a trusted partner that its hundreds of millions of Prime members turn to in times of uncertainty.
Amazon Web Services (AWS) is the leading global cloud computing provider, with 30% of the market. Its lead is not as large as in e-commerce, but it's still well ahead of the pack. And it's investing, specifically in generative AI, to pad its moat and offer the most comprehensive and practical programs for its clients.
AWS is still fast-growing, with sales up 17% year over year in the first quarter. Management sees incredible long-term opportunities as it builds AI into its business, and as more businesses get onto the cloud to engage with generative AI, AWS is prepared to receive them. AWS is a high-margin business that accounted for 63% of Amazon's operating income in the first quarter.
Advertising is Amazon's fastest-growing business, up 18% in the first quarter, and it's higher-margin than e-commerce. It also has a competitive streaming business, as well as opportunities in healthcare and physical retail, in addition to whatever else it might dip its toes into in the near future.
Amazon's varied businesses offer something for everyone. Buffett has said that he's not a tech fan, but Amazon is one of the biggest retailers in the U.S. It's similar to how he views Apple as a consumer products company rather than a tech giant. Amazon also has varied earnings streams, which Buffett likes in a great company, and a moat in its nearly unchallengeable business.
Wood looks for disruptors, and Amazon is disrupting many spaces. That's why it fits into so many of her ETFs, such as fintech innovation and autonomous tech and robotics.
Finally, Ackman bought Amazon recently on the dip, recognizing it as a deep-value opportunity. Amazon stock is down on tariff fears, and it's trading at decade-low valuations.
The Amazon position wasn't disclosed in Pershing Square's most recent 13-F filing and was likely bought after March 31. Its price-to-earnings (P/E) ratio hit a low of 27 in April, at which time it was likely scooped up by smart investors who recognized the opportunity, sending it back up. Although Wood has owned Amazon stock for years, she has been buying more of it at these levels, too.
Today, Amazon's stock trades at a P/E ratio of 35, and it still offers value for investors.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions in Apple, Nu Holdings, and Walmart. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Walmart. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
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