Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) added shares of e-commerce giant Amazon (NASDAQ: AMZN) to its closely followed $210 billion stock portfolio during the first quarter of 2019, according to CEO Warren Buffett, who recently disclosed the new holding to CNBC.
While Buffett has spoken favorably about Amazon and its CEO Jeff Bezos several times, the Oracle of Omaha never pulled the trigger on adding Amazon's stock to his portfolio. Now that Amazon is officially a Berkshire Hathaway stock holding, here's what we know (and what we don't know) about the investment.
Amazon is now in Berkshire Hathaway's portfolio, but not because of Warren Buffett. Image source: The Motley Fool.
Berkshire buys Amazon: What we know
First of all, it's important to emphasize that Warren Buffett did not make the Amazon investment. It was made by one of Berkshire's other two investment managers, Ted Weschler and Todd Combs. Each of them manages about $13 billion of Berkshire's investment portfolio, and Buffett has emphasized before that they both do so independently. In fact, Buffett has said that he often doesn't find out about the moves made by the two men until well after the fact.
But we do know that Buffett is a fan of Amazon. He's said before that he regrets not buying the stock a long time ago, stating that he failed to recognize the company's potential. He's also a fan of Jeff Bezos, and has a nice relationship with him through Berkshire's joint healthcare venture, Haven, with Amazon and JPMorgan Chase.
We also know that Berkshire Hathaway stock has lagged the broader market this year. Shares are up 6.6% in 2019, compared with the S&P 500's nearly 18% gain.
What we don't know
Details are admittedly light at this point, and there are two big pieces of the puzzle we don't know.
First, we have no idea how much Amazon stock Berkshire owns. It could be a few million dollars' worth, which would be a drop in the bucket for Berkshire, or it could be in the billions. We simply don't know yet.
Second, and most important, we have no idea why one of Buffett's investment lieutenants decided to buy Amazon. Did they think Amazon was a cheap value investment? Did they buy it because they feel it still has lots of room to grow? The answers to these questions are a big part of the story.
When we'll find out more
In light of the new revelation that Amazon is a part of Berkshire's portfolio, it's not unreasonable to expect a question or two about the e-commerce giant at Berkshire's annual meeting this weekend. Having said that, don't expect Buffett to reveal too much more information. After all, he generally doesn't discuss specific reasons Berkshire makes its investments, and the Amazon investment wasn't his in the first place.
It's more likely that the next time we'll learn some more details is when Berkshire releases its first-quarter 13F filing in mid-May. This document gives a snapshot of the stock portfolio at the end of the first quarter and will let us know exactly how many shares Berkshire had as of March 31.
This will be a key number to watch. Since Weschler and Combs each manage roughly $13 billion of Berkshire's money, an initial investment of hundreds of millions (typical for the pair) would say one thing, while a multibillion-dollar investment would convey tremendous confidence in the stock.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matthew Frankel, CFP owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Amazon and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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