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Berkshire Hathaway Buys More Amazon

Evan Niu, CFA, The Motley Fool

It's been just a few months since Warren Buffett acknowledged that Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) had invested in e-commerce behemoth (NASDAQ: AMZN) for the first time. The Oracle of Omaha said in May that one of his two top lieutenants -- Todd Combs or Ted Weschler -- had started to acquire Amazon shares, without detailing which money manager made the call.

At the time, Buffett said he didn't consider it a significant investment, but claimed he had "been an idiot for not buying" up until now, particularly since he's long admired Amazon and CEO Jeff Bezos. "I was impressed by Jeff Bezos early, I never thought he'd pull off what he did, on the scale of what's happened," Buffett said in 2017. "It's changed your behavior, everybody's behaviors."

Amazon delivery driver leaning out of van window to show another worker something on his smartphone

Image source: Amazon.

It may not have been Buffett's decision, but Berkshire Hathaway just bought some more Amazon.

$1 billion worth of Amazon

In a new quarterly 13F filing this week, Berkshire disclosed that it had bought 54,000 more Amazon shares in the second quarter, bringing its total holdings to 537,300 shares. That represents a sequential increase of 11%. At the end of June, the position was valued at approximately $1.02 billion. Berkshire Hathaway's total portfolio is worth over $200 billion, so a $1 billion position is fairly small. Shares have declined thus far in the third quarter, due in large part to the company missing earnings estimates in the second quarter.

Buffett is famously averse to tech companies, since he has always said he has difficulty understanding the businesses and prefers to invest in ones that he can understand. Amazon's core e-commerce business is relatively straightforward, but the Amazon Web Services (AWS) segment -- which represents the bulk of operating profits -- is highly technical and could be considered challenging for some investors to understand.

Buffett's avoidance of tech changed in 2011 when Berkshire Hathaway started to invest in IBM (NYSE: IBM). After holding for seven years, Berkshire Hathaway exited that position in 2018 at a modest loss. Buffett may have come out positive after factoring in dividend income, but IBM undoubtedly underperformed the broader market during that time in total return by a significant margin.

Berkshire also bought into Apple (NASDAQ: AAPL) in 2015 and now holds nearly 250 million shares. The holding company's position in the Mac maker has not changed over the past two quarters, in line with Buffett's suggestion earlier this year that shares had gotten too expensive. However, Buffett doesn't really consider Apple a tech company, and instead thinks of it as a consumer products company. Apple is now Berkshire's largest holding, worth over $50 billion and representing roughly 25% of the total portfolio.

Now that Berkshire is an Amazon shareholder, investors will want to keep an eye on whether Berkshire keeps on scooping up shares.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon, Apple, and Berkshire Hathaway (B shares). The Motley Fool is short shares of IBM and has the following options: short January 2020 $200 puts on IBM, short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), short September 2019 $145 calls on IBM, long January 2020 $200 calls on IBM, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

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