I vividly remember opening my Stocks and Shares ISA many years ago. While a little daunting at the time (“How on earth does the stock market work anyway?“), I’d do exactly the same thing if I were thinking of getting started with investing now. 

Why invest via a Stocks and Shares ISA?

With such an ISA, by far the biggest incentive for me is that any profits I make are free from capital gains tax. Call me miserly but I’d rather hand as little as possible back if I’ve taken on the responsibility of growing my wealth. 

The tax benefits of an ISA don’t stop there. In addition to not paying any tax of profits, I’m also not required to pay anything back for dividends I receive, assuming the investment I hold pays them.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Here’s what I’d buy

With £50 a month to invest, I’d start with buying an exchange-traded fund (or ETF).

An ETF simply tracks the return of the stock market. To give an example, the FTSE 100 index, which features the UK’s biggest companies, returned 14.3% in 2021. An ETF tracking the FTSE 100 would return almost exactly the same (once costs are factored in). 

Buying an ETF would make particular sense to me as a newbie investor because my money would be spread between lots of different companies. While this won’t stop the value of my investment from falling in tough times, there are none of the risks that come from buying shares in a single business. 

Clearly, I’m not obligated to buy a fund tracking the FTSE 100. There are actually a huge number of ETFs available following all sorts of markets and types of stock.

Nor must I stick to buying only these funds (although many people like to keep things simple and do). Once I became more confident in how the market works, I can expand my portfolio to include other assets.

Keep fees low

It’s worth saying a little more about fees. Since it’s essentially managed by a computer rather than a human (aka a passive fund), an ETF’s fees tend to be low. Over years, this really matters. It means more of my money is allowed to compound. 

I’d also take advantage of my broker’s ‘regular investing’ service. This invests my money on a set date each month rather than immediately. As a result, my commission fees (what it costs to buy or sell a fund or stock) are roughly 10% of what they normally would be. Again, these savings add up over time and allow more of what I put in to grow in value. 

Any downsides?

For me, there’s aren’t many downsides to opening a Stocks and Shares ISA. Still, let’s have a go at scraping the barrel. 

One fairly obvious cost is having less cash to spend today. There’s no way of getting around this other than to earn more and/or reduce my spend. Becoming an investor also requires patience. This is no ‘get rich quick’ scheme.

The good news is that investing for the long term quickly becomes a habit. In fact, knowing that money I put away now might/should become a great nest egg eventually makes the process rather addictive.

And of course, we’re talking about £50 here. I could potentially accumulate a lot more wealth by increasing the amount I set aside every month. 

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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. 

When looking for UK shares that I’d buy and hold for the long term, it’s important to consider company strategy, stability, and strength. For instance, I’d look at if the business has a coherent long-term strategy that could boost its share price and dividends. But at the same time, I’d look for a rock-solid balance sheet that could help it during testing periods.

Top UK shares

One such UK share that I’d buy in February is British housebuilder Persimmon (LSE:PSN). There’s much to like about this FTSE 100 business. For one, there is a chronic shortage of homes in the UK. The government remains supportive of the industry and has an ambition to supply 300,000 new homes per year by the mid-2020s. But last year just 216,000 homes were built. It’s clear that more housing needs to be built and Persimmon looks well-placed to help deliver some of the much-needed housing supply. In fact, Persimmon delivered almost 117,000 new homes in the last eight years.

A word of warning though. Demand for housing is affected by mortgage availability and interest costs. If the Bank of England decides to raise interest rates much further, it could hamper housing demand in the short term. Tighter lending criteria could also have a similar dampening effect.

9.5% dividend yield

That said, here’s what I really like about this share. Persimmon’s strategy includes buying high-quality land but only when it meets its strict criteria. This disciplined approach has helped the group achieve a market-leading return on capital of over 25%. It’s also a cash-generative business, and much of that excess cash is returned to shareholders in the form of dividends. As such, it currently boasts a dividend yield of 9.5%. That’s impressive.

Although the past isn’t always the best guide, over the past 10 years, Persimmon shares achieved an annual return of 20% per year. That figure includes dividends, but is nonetheless impressive. I’d say it’s a quality UK share worthy of my Stocks and Shares ISA.

Laser-focused UK shares

Another strong performer I’d buy right now and hold for 10 years is a much smaller business called Somero Enterprises (LSE:SOM). This AIM-listed share has achieved a phenomenal 49% annual return over the past decade. That’s enough to turn a £1,000 investment into a whopping £54,000 over a decade. So what does it do? Somero manufacturers laser-guided equipment to make perfectly level concrete floors. Earnings are growing steadily and it’s well-placed to capitalise on several growing markets. For instance, its machinery is used to make floors for data centres and large warehouses. With the growth of e-commerce and cloud data storage, it looks like Somero could be busy for some time.

Granted, it does operate in a cyclical industry. So, earnings could suffer in the short-term in the event of an economic downturn. That said, I reckon Somero has a solid balance sheet that should shield it in difficult times. It’s cash-generative, has little debt, and operates with an impressive 33% profit margin. Finally, it even offers a forecast dividend yield of 7%. That’s not as high as Persimmon, but with the average FTSE 100 share yielding 3.2%, I’m not complaining.

Harshil Patel owns Persimmon and Somero Enterprises, Inc. The Motley Fool UK has recommended Somero Enterprises, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

When it comes to renewable energy, Warren Buffett’s Berkshire Hathaway is one of the largest investors in the US.

The company does not shout about its green credentials from the rooftops, but it is making substantial progress in revolutionising the energy grid across North America. 

The billionaire investor can see in which direction the world is moving. And so can I. That is why I would follow his actions and buy SSE (LSE: SSE). 

Warren Buffett and green energy

Buffett’s Berkshire invests in renewable energy through its Berkshire Hathaway Energy (BHE) business. This division has invested tens of billions of dollars in wind and solar farms across the United States. 

Unlike other renewable energy investors, Buffett is not particularly interested in speculating on high-growth or unproven technologies. He is looking for a suitable return on his investment. BHE can offer just that as it expands its green energy arm, and I think SSE can replicate the same approach for my portfolio. 

SSE is already an established utility producer in the UK. It has an expansive footprint of energy generation and transmission assets across the country. It is looking to grow this footprint further in the years ahead by investing billions in new renewable energy developments. 

Other companies are using the same approach, but where SSE differs is that this business has been an active electricity generator for decades. It has the skills, financial resources, and experience required to capitalise on this industry trend. Further, it can do so without taking any high-risk bets on the industry’s future direction. 

Renewable energy champion

Despite its attractive qualities, this is a highly regulated industry. The company is also much bigger than many of the smaller, more nimble competitors trying to grab market share. Therefore, competitive forces and regulatory headwinds could hold back the firm’s expansion plans in the years ahead. The current UK energy crisis may also throw up some obstacles for the business to overcome. 

Even after taking these challenges into account, I believe the corporation is heading in the right direction overall.

What’s more, unlike other companies in the space, including Buffett’s Berkshire Hathaway, shares in SSE offer an attractive dividend yield of 5.4% for the year ahead. Although I should caution that this yield could come under pressure if the firm has to ramp up investment or reduce expenditure to meet rising interest costs. 

Acquiring SSE for my portfolio will help me copy Buffett’s approach for investing in green energy. I own shares in Berkshire Hathaway, allowing me to invest alongside the billionaire investor and his expanding renewable energy presence. 

As the energy transition accelerates, I believe these two investments will allow me to capitalise on the changing face of the energy industry without taking on too much risk, or speculating on unproven companies and technologies. 

Rupert Hargreaves owns Berkshire Hathaway (B shares). The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

After flying through the coronavirus pandemic storm, it looked as if the IAG (LSE: IAG) share price was on track to hit clearer skies in 2022. 

Unfortunately, it is starting to look like the group is heading towards another patch of turbulence. This is clouding the company’s outlook and making it harder for me to assess whether or not this enterprise can claw back some of the losses it booked throughout the pandemic in the year ahead. 

IAG share price threats 

The IAG group is made up of a collection of airlines, including British Airways. All of these companies, excluding BA, are located in Europe, which might become an issue for the group. Under EU rules, airlines operating out of the region have to be majority-owned by EU domiciled businesses.

As the UK is no longer part of the EU, and negotiations to remedy this issue are going nowhere, there is growing speculation that IAG could be forced to divest BA and re-domicile in Europe. 

It is difficult to understand how such a change would impact the group. BA operates some of its most lucrative routes across the Atlantic. These provide valuable cash flow for the rest of the business.

IAG works because it can use economies of scale to push down costs and increase synergies. If it is broken up, it is impossible to say what sort of impact this will have on the individual businesses. 

At the same time, the company has to fight off increasingly aggressive competitors. Low-cost peer Ryanair recently announced that it would be rolling out significant discounts on its flights to encourage consumers to return to the skies. This challenge could draw IAG into a fare war. That is the last thing the corporation needs. 

These are the biggest challenges facing the IAG share price today, but the company also has plenty of opportunities. 

Opportunities on the horizon

The global aviation market is recovering from the pandemic. There have been some bumps along the way, but the overall trend suggests consumers are returning to the skies. 

It also looks as if countries are rolling back travel bans. Research shows these have been relatively ineffective against containing the spread of the highly contagious coronavirus. 

These themes suggest that the company does have some tailwinds behind it that should help support its recovery in the months and years ahead. City analysts believe the enterprise will almost break even this year, based on current trends. That could be a strong positive for the IAG share price. 

Even a modest improvement in this forecast could see the company return to profit, which would almost certainly improve investor sentiment towards the business. 

However, even after considering these favourable factors, I think the outlook for the enterprise is incredibly uncertain. As such, I would not buy the stock for my portfolio today. I would rather wait to see how the operating environment develops over the next 12 months. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

Inflation in parts of the globe is soaring at jaw-dropping pace. However, I think the market could be underestimating the scale of the crisis, leaving plenty of scope for safe-haven assets like gold to rise in price.

Take latest consumer price inflation from the US, for instance. On Thursday, it was announced that prices rose 7.5% year-on-year in January, a fresh 40-year high. This was also up considerably from 7% in the prior month and above broker forecasts of 7.3%.

Gold prices sprung back above the $1,840 per ounce marker in response and to within a whisker of three-month highs.

With energy and labour costs surging and supply disruptions continuing it appears as if inflation should keep rising. In the UK, the Bank of England now expects consumer prices to be up 7.25% year-on-year in April. This is up from a prior prediction of 6% made just three months ago.

Limited firepower?

All this data doesn’t necessarily mean that gold prices will surge. Central banks have been raising rates to counter the scale of rising prices and they’re expected to keep doing so. This has certainly compromised gold’s ability to rise in recent months.

That said, a big question remains over how far central banks will be able to increase interest rates without choking off the economic recovery. I think the stage could be set for precious metals prices to run and run.

A golden penny stock

Centamin is a UK share I’m thinking of buying to make money against this backdrop. It pulls gold out of the ground from its Sukari mine in Egypt, a project from which it is steadily ramping up production. It also has exploration and development projects under way in Côte d’Ivoire and Burkina Faso.

Bringing new mining assets on stream can be extremely costly business. And any overruns on its capital expenditure plans could have a big impact on future dividends. But as things stand today, City analysts expect Centamin to continue paying big dividends over the short-to-medium term.

Dividend yields sit at 5.2% and 5.3% for 2022 and 2023 respectively. This makes it a very attractive dividend stock, in my opinion.

Another top dividend stock

I’m also considering investing in Sylvania Platinum today. The precious grey material that it pulls off the ground is a dual-role metal. This means that demand can rise when investors are nervous, and also when the economy grows. Platinum group metals (PGMs) are used chiefly to make catalytic converters for cars and creating jewellery.

This dual-role status however means that Sylvania’s profits could suffer if the economic recovery runs out of steam. This is something that gold miner Centamin’s investors don’t need to be worried about. Still, this is a risk I could be willing to take given the company’s cheap share price. It trades on a P/E ratio of below 4 times.

This, as well as Sylvania’s big yields of 7.2% and 5.6% for this year and next respectively, means the South African miner offers stunning value right now.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

The BT (LSE: BT.A) share price has been one of the strongest performers in the FTSE 100 this year. Year-to-date, shares in the telecommunications giant have returned around 15%. Over the past year, the company’s performance has been even more impressive.

Over the past 12 months, the stock has returned 62%, rallying after its pandemic-induced slump. Indeed, the shares have nearly doubled from the multi-year low of 98p printed in July 2021. Based on this performance, I think it is fair to say that the company has earned the title of the FTSE 100’s comeback kid. 

It looks to me as if this performance can continue. As the business continues to rebuild investor and customer confidence in its operation, I believe the stock can push back to the levels last seen at the beginning of 2019. 

BT share price outlook 

Over the past two years, the company has accelerated its capital spending plans to meet the demands of regulators and consumers. 

The group is now spending billions every year on its fibre broadband rollout and recently unveiled plans to hire an additional 4,000 engineers for its Openreach division. 

I think this is a very sensible decision. BT has long neglected its capital spending obligations. This has had an impact on customer service and customer offering. Now that it is investing, customers are starting to return. 

Based on the firm’s recent progress, City analysts believe it will earn £1.8bn in the 2022 fiscal year, up from £1.5bn in fiscal 2021. If BT can hit this target, analysts are projecting further growth in fiscal 2023. The City is expecting a net income of £2bn from the company for the year. 

Of course, there is no guarantee the firm will hit this target. Nevertheless, if it does, it will be the first time earnings have grown since 2016. 

This could mark a dramatic turnaround for the enterprise and help crystalise better sentiment towards the BT share price. Indeed, based on these projections, the stock is selling at a forward price-to-earnings (P/E) multiple of just 9.6.

Fighting for growth

There are plenty of challenges the firm will have to overcome to maintain this growth. Rising cost pressures may hit margins (although BT is hiking prices by as much as 10% to offset higher costs).

The company also has to spend more on marketing to bring customers back following years of underinvestment. Further, competition is growing, forcing the group to up its game to keep peers at bay.  

Despite these headwinds, I am optimistic about the outlook for the BT share price. If the firm can maintain its current trajectory, I see no reason why the stock cannot achieve the same earnings multiple as it did in 2016, the last time earnings were expanding.

Back in 2016, the stock was trading at a forward P/E multiple of 13. Based on current City earnings projections, this suggests the stock could be worth as much as 270p. 

Considering this valuation, I would be happy to add the stock to my portfolio today. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

Recently, I noted why I would use the current decline in the Scottish Mortgage Investment Trust (LSE: SMT) share price to buy a position in the stock.

Rather than buying the shares for my traditional dealing account, I want to add the investment to my Stocks and Shares ISA. I believe the tax benefits of this account provide the perfect wrapper in which to hold a growth-focused investment such as this. 

Stocks and Shares ISA benefits 

UK investors can save up to £20,000 a year in a Stocks and Shares ISA. They can acquire a range of investments with assets held inside one of these wrappers. However, the investments must be traded on a ‘recognised stock exchange‘. Put simply, this means any developed main market, including AIM. 

Any capital gains or income earned on an investment held within an ISA is not liable for tax. I do not even have to declare the income on my tax return. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

One of the reasons I would buy the Scottish Mortgage Investment Trust is its focus on growth investments. The trust has a long track record of hunting for growth stocks and private companies. Some of these have been duds. Many have gone on to produce huge returns for the trust and its investors.

Scottish Mortgage Investment Trust potential 

While I will not use past performance to estimate the trust’s future performance, I think its focus on growth investments could continue to produce significant capital returns. That is why I would hold the trust in my Stocks and Shares ISA over any other investment account.

The potential tax savings outweigh all other factors. Using an ISA also suggests I can reinvest the profits in other investments without having to worry about tax on these future holdings either. 

Still, I am getting ahead of myself. There is no guarantee the Scottish Mortgage Investment Trust will produce positive returns. The trust could even inflict losses on my portfolio. Growth investing is notoriously risks. If the trust’s managers make a mistake, my hard-earned money is at stake. 

Despite this risk, I think the firm’s exposure to fast-growing stocks in markets like China and the US put it in a great position to capitalise on the post-Covid economic recovery.

Organisations like ASML and Tesla have substantial competitive advantages, which should help them outperform rivals. Tesla is the world’s leading electric vehicle producer, and ASML designs and sells machines for producing microchips. It is the only company in the world with access to specific technologies.

I would like some exposure to these high-flying firms in my portfolio. I believe the Scottish Mortgage Investment Trust presents one of the best ways to do just that, especially when held in a Stocks and Shares ISA.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

I am always looking for new ways to boost my passive income from investments. I believe investing in equities is one of the best ways to create a steady income.

Combined with the tax-efficient nature of a Stocks and Shares ISA, the strategy could be twice as effective. 

ISAs are a great tool to invest in the market because any income or capital gains earned on assets held within one of these wrappers are not liable for tax. 

This suggests I could generate a tax-free passive income by investing and saving in a Stocks and Shares ISA. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Stocks and Shares ISA investing

According to my calculations, I only need to invest £50 a month to generate a passive income from equities. A figure of £600 a year might not seem like much, but thanks to the power of compound interest, this could become a significant sum in the long run. 

According to my calculations, if I can achieve an average annual return of 10% on my money, I calculate I could have a nest egg worth £40,000 after 20 years of saving.

This is only a ballpark figure. I cannot assume I will generate a 10% return indefinitely.

Nevertheless, I believe it clearly illustrates the wealth-creating power of equities in the long run. If I were to increase my monthly deposit to £500, I think I could accrue a near £400,000 investment pot after two decades of saving. 

This is entirely compatible with a Stocks and Shares ISA as investors can deposit £20,000 a year into one of these investment accounts. This figure of £500 a month is only £6,000 a year.

Using the entire allowance of £20,000 a year with a 10% per annum return could produce a £1.3m investment pot within 20 years. 

Still, as I touched on above, success is not guaranteed with this approach. Equity markets can be pretty volatile. If they fell 50% in a single year, it could take me several years to recover from these losses. There is also no guarantee I will learn 10% per annum. The actual figure could be a lot more, or a lot less. There is no way of telling.

Passive income strategy 

Despite these challenges, I believe this strategy is one of the best ways to create a passive income. By investing £50 a month, I could build a nest egg worth £40,000 after 20 years. If I then switch from growth investing to income investing, I could earn a 7% per annum return on my money, based on current dividend yields.

Once again, this figure is only designed to illustrate the potential return available. There is no guarantee I will be able to invest in stocks yielding 7%.

But if I can, I could turn my investment lump sum of £40k into an annual passive income of nearly £3,000. This income would be tax-free if generated by assets in a Stocks and Shares ISA. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

Stock investors need to work harder to get a positive return from their invested cash as inflation soars. Consumer price inflation has just hit three-decade highs of 5.4%. The Bank of England (BoE) reckons it could peak at 7.25% in the spring too.

I’m not clenching my fists with worry however. This is because there are plenty of UK shares out there whose dividend yields sit above even these elevated levels of inflation. There are several on the FTSE 100 alone which I’m considering snapping up today.

One of these is financial services giant M&G (LSE: MNG).

Looking good

M&G was, up until recently, part of financial services giant Prudential. It was spun off in late 2019 as part of ‘The Pru’s’ plan to focus on fast-growing emerging markets in Asia. Don’t think for a second though that Prudential’s decision to separate from M&G is a reflection of the latter’s profits outlook. I strongly believe that M&G could help deliver huge shareholder returns over the long haul.

Savers have been getting a dreadful return from standard financial products since the 2008 financial crisis. The BoE kept rates at rock-bottom levels to help the economic recovery. As a consequence, people had to search around to get a decent return on their cash. This also meant that demand for the wealth management services that the likes of M&G provides soared.

The BoE is raising rates again. But, so far, this is yet to be reflected by a solid improvement in savings rates. I don’t expect things to improve much for savers either given that interest rates are predicted to remain well below their historical norms. Even Lloyds Bank’s most optimistic scenario suggests interest rates will remain below 1.8% through to 2024.

Rising above the pack

I wouldn’t just buy M&G because returns from traditional savings products should remain pretty poor. I believe the FTSE 100 firm’s expertise in providing financial products for retirees will also help it to generate big profits in the years ahead. Britain’s population is rapidly ageing — it’s estimated that one-in-six of us will be aged 65 or over by 2050 — leaving M&G and its peers with plenty of business to win.

Speaking of which, M&G will have to work extremely hard given the amount of competition it is up against. The financial services industry is cutthroat and signs of underperformance versus its peers could be extremely damaging. That said, I can take comfort from M&G’s solid track record when it comes to generating decent returns for its customers.

9% dividend yields!

Besides, at current prices, I think M&G’s share price looks mighty attractive when we’re talking about reward-to-risk. Today, the wealth manager trades on a forward P/E ratio of 10.3 times, roughly in line with the accepted value watermark of 10 times.

But it’s in the dividend arena where M&G really looks like a top buy. Its yield sits at a mighty 9% for 2022, well above the 3.5% FTSE 100 average. This is a share I’d buy today and expect to hold for many years.

Royston Wild owns Prudential. The Motley Fool UK has recommended Lloyds Banking Group and Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.

Back in 2019, Warren Buffett bought Amazon (NASDAQ: AMZN) stock for his portfolio. His purchase prices were between $1,500 and $1,819, with an estimated average price of around $1,660 per share.

Since then, Amazon shares have had a great run, making Buffett a lot of money. However, I think there’s a long growth runway ahead for the stock. With that in mind, here’s a look at four reasons I’d follow Buffett and buy AMZN stock for my portfolio today.

Online shopping powerhouse

The first thing that excites me about Amazon is the long-term potential in e-commerce. This market is projected to grow by nearly 10% per year between now and 2028 and Amazon is the industry leader.

Now, Amazon is experiencing a few challenges in this area of its business right now. Like most retailers, it’s suffering from supply chain issues, product shortages, labour shortages, and higher costs. However, I don’t expect these issues to last forever.

Last week, CFO Brian Olsavsky said Amazon is now in a better position to handle labour and supply chain challenges. “We do see the sun coming out and getting better here over the next number of quarters,” said Olsavsky.

Meanwhile, Amazon is shortly about to hike its Prime membership prices. In the US, annual membership will rise from $119 to $139. Given that Amazon has over 200m Prime members, this should result in a nice boost to the top line.

Cloud computing champion

I also like the potential in the company’s cloud computing division, Amazon Web Services (AWS), which provides remote computing, storage and database services. Amazon is seeing very strong growth here right now.

Last quarter, revenue from AWS came in at $17.8bn, up nearly 40% year-on-year. Meanwhile, operating income from this segment amounted to $5.3bn. This shows that AWS is a very profitable business for Amazon.

Digital advertising monster

Amazon is also now a major player in the digital advertising space. Indeed, it’s having so much success here that it’s now the third largest player in the US market, behind Google and Facebook. Last quarter, revenue from advertising amounted to $9.7bn, up 32% year-on-year.

Artificial intelligence leader

Finally, a fourth reason I’m bullish on Amazon is that the company is one of the biggest players in the artificial intelligence (AI) space. Today, the company has mature AI applications across online shopping, warehousing, logistics, and more. According to GlobalData, Amazon is among the companies best positioned to take advantage of future AI disruption in the technology industry.

I’d follow Buffett and buy Amazon stock

Of course, while Amazon has a lot of going for it, there are risks to consider. One is the stock’s valuation. Currently, Amazon has a forward-looking P/E of about 66, which is quite high. If growth slows, the stock could fall. It’s worth noting that Amazon stock has had some big pullbacks in the past.

Another is competition from other tech companies. In the cloud space, Amazon has competition from the likes of Microsoft, Oracle, and Alphabet.

All things considered however, I see a lot of investment potential here. That’s why I’d follow Buffett and buy the stock.

John Mackey, 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. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares in Alphabet (C shares), Amazon, and Microsoft. The Motley Fool UK has recommended Alphabet (A shares), Amazon, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore 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.