1. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 339
Amazon.com, Inc. (NASDAQ:AMZN) is the Best Warren Buffett Stock because it controls the markets it services, especially in e-commerce and cloud computing. It has a lot of benefits over its rivals and has emerged as the clear leader in e-commerce because of its scale and reach, which provide clients with an unmatched selection of affordable products. Despite its size, the company continues to increase its market share, showing the secular trend toward e-commerce. Prime not only integrates Amazon’s e-commerce efforts but also offers a steady stream of high-margin recurring revenue from customers who make more frequent purchases from the company’s domains. In return, customers get one-day shipping on millions of items, exclusive video content, and other perks, which creates a powerful positive feedback loop that attracts both buyers and sellers. The Kindle and other devices further reinforce the ecosystem by drawing in new customers and attracting existing ones with their value offer.
Operating cash flow for the trailing twelve months period was $115.9 billion, up 36% from $84.9 billion for the same time in the previous year, which concluded in December. In February, Amazon.com, Inc. (NASDAQ:AMZN) announced that it would invest over $100 billion in capital expenditures this year, with a significant focus on artificial intelligence advancements. This decision was taken in spite of DeepSeek’s success as a Chinese AI startup, which is renowned for producing incredibly effective and affordable AI models that have ignited the IT sector. Amazon allocates a large portion of its capital expenditures to AI development through AWS, or Amazon Web Services, which demands initial hardware and data center investments to support the platform’s rapid growth.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
Overall, Amazon.com, Inc. (NASDAQ:AMZN) ranks first on our list of the 10 Best Warren Buffett Stocks to Buy Right Now. While we acknowledge the potential for AMZN to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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