Do billionaires of a feather flock together? Not necessarily. Warren Buffett and David Tepper serve as good examples.
Both men rank among the wealthiest people in the world, with Buffett's net worth around $146 billion and Tepper's net worth topping $21 billion. Both are long-term investors who sometimes take contrarian positions.
But these two billionaires aren't attracted to the same stocks very often. Buffett's Berkshire Hathaway portfolio includes 41 holdings. Tepper's Appaloosa Management hedge fund has 37 holdings. However, Buffett and Tepper own only one stock in common.
Two stocks with an asterisk (and one with two asterisks)
Before I reveal which lone stock is in both Berkshire Hathaway's and Appaloosa Management's portfolios, I must acknowledge something that isn't readily apparent. Technically, Buffett and Tepper own three of the same stocks. However, two of those stocks come with an asterisk beside their names.
To explain the situation, let's review some corporate history. In 1995, General Re acquired New England Asset Management (NEAM). Around three years later, Berkshire Hathaway acquired General Re. Why is this important? Because NEAM still has its own investment portfolio that's separate from Berkshire's.
NEAM's holdings include Microsoft and Qualcomm. Both tech stocks are also in Tepper's Appaloosa portfolio. Buffett doesn't manage NEAM's investments but indirectly owns shares of Microsoft and Qualcomm.
While these two stocks warrant an asterisk beside their names, another stock deserves two asterisks. NEAM owns Google parent Alphabet's Class A shares. Tepper doesn't own the Class A shares but does own Alphabet's Class C shares, which trade under a different ticker. In this case, Buffett, indirectly, and Tepper, directly, are invested in the same company, although not the same stock.
Buffett's and Tepper's common denominator
What's the one stock that's a common denominator in Buffett's and Tepper's holdings that doesn't require a special explanation? Amazon(NASDAQ: AMZN).
Berkshire Hathaway first bought Amazon stock in the first quarter of 2019. Buffett subsequently revealed that the decision to buy Amazon was made by one of his two investment managers. However, Buffett has liked Amazon and its founder Jeff Bezos for years.
He no doubt approved of the purchase. The legendary investor has even expressed regret in the past for not buying Amazon stock sooner.
Interestingly, Tepper also initiated a new position in Amazon in the first quarter of 2019. Unlike Buffett, he has never been hesitant about buying high-flying growth stocks.
Which of these two billionaires is more bullish about Amazon? That's a difficult question to answer. Amazon ranks as Tepper's second-largest holding, making up roughly 10.9% of his hedge fund's portfolio. The stock is only a drop in the bucket for Buffett, making up 0.6% of Berkshire's portfolio.
However, Berkshire owns 10 million shares of Amazon, while Appaloosa owns around 3.5 million shares. Also, Tepper recently reduced his hedge fund's position in Amazon by 9.2%. Berkshire hasn't sold any shares of Amazon this year despite Buffett being a net seller of stocks.
Should you own Amazon stock, too?
I'd never recommend buying any stock solely because a famous investor owns it. On the other hand, I think it's smart to try to understand why other investors like a given stock. Maybe you'll agree with their reasoning.
So why do Buffett and Tepper like Amazon? The three-word answer is -- its phenomenal business. Amazon is a juggernaut in e-commerce and cloud services. Both markets have strong growth opportunities, but the prospects for Amazon Web Services (AWS) -- the world's largest cloud service provider -- are especially promising.
Amazon has two things that make it much more likely to beat the market than most stocks. First, it possesses a strong moat. Second, it has optionality (i.e., multiple paths to grow).
Every investor must make their own decision about which stocks to buy. Amazon won't be a great pick for everyone. However, for many long-term investors, I suspect the choice is an easy one. Flock with billionaires Buffett and Tepper by buying Amazon.
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John Mackey, former 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. Keith Speights has positions in Alphabet, Amazon, Berkshire Hathaway, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Microsoft, and Qualcomm. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
