What do Warren Buffett, Jeff Bezos, David Tepper, Ken Griffin, Israel Englander, and Philipe Laffont have in common? Well, two things. First, they’re all billionaires. Second, they all own a certain growth stock.
Now, I’m not surprised these wealthy – and astute – individuals own this particular stock. Looking ahead, it appears to have enormous potential. I believe it has so much potential that I’ve gone and made it my largest portfolio holding.
A world-class growth stock
The stock I’m referring to is Amazon (NASDAQ: AMZN), which is listed in the US.
Now, you may think of this company as an online shopping giant. It’s much more than that. Today, Amazon’s one of the world’s largest providers of cloud computing services with its platform Amazon Web Services (AWS).
Meanwhile, it’s also one of the world’s largest companies in digital advertising (a very lucrative industry).
On top of this, the company’s active in a range of other high-growth industries including artificial intelligence (AI), self-driving cars, and satellite broadband.
Overall, it’s a beast of a company. And while it has been around for a few decades now, I reckon it’s just getting started.
Why I’ve gone ‘all in’ on Amazon
As for why I’ve made it my largest holding, there are a few reasons. One is that the company’s profits are soaring, thanks to an efficiency drive by CEO Andy Jassy. This year, earnings per share are forecast to rise about 57%. That’s the second highest level of growth among the ‘Magnificent Seven’ companies (behind Nvidia).
Another is that the company’s valuation is near historic lows. And currently, its price-to-earnings-to-growth (PEG) ratio is under one. A ratio that low generally suggests that a stock’s a bargain.
A third reason is that the stock has lagged the other Big Tech stocks in recent years. For example, over the last three years, it’s only risen about 10%, versus nearly 70% for Microsoft. So I reckon it has some catching up to do.
Finally, it’s worth mentioning that the chart below looks amazing. Currently, Amazon’s share price is in a strong uptrend. And recently, it broke out to new all-time highs (which can be a very bullish signal).
Investing alongside billionaires
Of course, there are plenty of risks with this one. Competition from other technology companies is one. In cloud computing, the company’s up against Microsoft and Alphabet. In online shopping, it’s seeing competition from new rivals such as Temu.
The valuation’s a risk too. While the PEG ratio’s under one, the P/E ratio’s still high at 44. This doesn’t leave a lot of room for error. If growth slows, the stock could fall.
I’m encouraged by the fact that a ton of super-smart billionaires own it though. So I’m backing it to climb higher in the months and years ahead.
This post was originally published on Motley Fool
