Want to score big wins in 2025? Taking a page or two out of Buffett’s investing playbook could be a great move.
Warren Buffett has earned recognition as one of history’s most successful investors — and he’s delivered incredible returns for shareholders who put faith in him. In fact, if you owned a $1,000 stake in Berkshire Hathaway on the day the Oracle of Omaha purchased a controlling stake in the company and become its CEO in May 1965, your position would now be worth roughly $37.7 million.
With that kind of incredible performance, it’s no wonder that investors around the world pay close attention to the Oracle of Omaha’s investing moves and wisdom. If you’re looking to get a jump on financial wins in the new year, read on to see why two Fool.com contributors think that these two Buffett-backed stocks look like great buys to start 2025.
This stock has made Buffett’s short list for buys
Keith Noonan (Sirius XM): With the market surging lately, Buffett has actually been adopting a more conservative position on investing. Berkshire Hathaway has been a net seller of stocks over the last year, and there are some signs that the Oracle of Omaha has valuation concerns when it comes to the broader market. But Berkshire has still been buying some stocks recently, and Sirius XM (SIRI -3.07%) is one of the few companies the investment conglomerate has continued to invest in.
While the broader market has been enjoying an impressive rally, Sirius stock has actually seen huge sell-offs. As of this writing, the company’s share price is down roughly 59% over the last year. Berkshire has warmed up to growth-oriented tech companies in recent years, but Buffett remains a value investor at heart — and it appears that he and his analyst teams see Sirius as a classic value play.
Of course, there have been some substantive catalysts driving Sirius’s big valuation pullback. While the company is the clear-cut leader in satellite radio services, the rise of streaming platforms including Spotify and Apple‘s Apple Music have put pressure on its business model. On the other hand, Sirius is taking steps to improve its position in streaming, and it’s also making smart moves to strengthen partnerships with auto manufacturers. By getting its hardware into more vehicles, the company can continue to target the largest and most important segment of its addressable market.
Additionally, Sirius is also taking major steps to reduce its spending. While the company will continue to spend on new content and programming, it’s taking some drastic steps to reduce capital expenditures. Essentially, the company thinks that its core infrastructure is already in place and sustainable. As a result, it expects being able to reduce annual capital expenditures (capex) from approximately $300 million this year to zero in 2028. This should provide a substantial positive catalyst to the company’s already solid bottom-line results.
Sirius is trading at roughly 17 times 2024’s and just 88.5% of expected sales. Meanwhile, the company is trading at approximately 7 times expected earnings for 2025. Shares look attractively valued right now. If you’re looking to take a page out of Buffett’s investing playbook for 2025, the stock is a top pick.
Generative AI and a lot more
Jennifer Saibil (Amazon): Amazon (AMZN 0.38%) is taking a page from its own playbook and creating an entirely new business out of generative artificial intelligence (AI). In two short years, it has exploded from a new concept into a full-fledged business that already has a billion-dollar run rate, and management believes the best is yet to come.
AI has been an integral part of Amazon’s e-commerce business for years. Amazon uses it to make inventory decisions and product recommendations, with instant comparisons and similar items to achieve quick conversions. Amazon has millions and even billions of data points that it uses with machine learning that lead to accuracy and sales generation.
The company takes all that data a step further with generative AI. It uses its trove of data to create large language models (LLM), and it offers the use of these LLMs to cloud computing clients through its Bedrock program. Amazon also offers tools for users to create their own LLMs using their own data for an even more customized experience, and it also offers AI tools for small businesses that don’t have the budget or manpower for a custom program.
Aside from the use of its AI platform, Amazon is also developing its own graphics processing units (GPU) that are more affordable than GPU giant Nvidia‘s. Amazon will continue to partner with Nvidia for its largest Amazon Web Services (AWS) clients working at the bottom layer and creating their own LLMs, but Amazon’s GPUs will make it easier for middle-level clients to get top performance without overdoing expenses.
CEO Andy Jassy noted that Amazon has launched more AI features and services in the past year and a half than all the other leading cloud computing providers together. He also keeps saying that 90% of company information technology (IT) spend is still on premises, but it’s going to shift to the cloud, and Amazon is prepared for the moment. It’s already seeing new client signups for AWS because companies want to get in on generative AI, and they can’t get the full benefits without being on the cloud. AWS sales growth accelerated in the third quarter to 19% year over year.
Generative AI might be Amazon’s strongest growth driver right now, but it’s not the only one. It’s upgrading its e-commerce distribution network to be cheaper and faster, it’s supercharging its advertising business, and it’s investing in its streaming networks. Amazon is in an excellent position to thrive in 2025 and reward investors.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in Apple. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Nvidia, and Spotify Technology. The Motley Fool has a disclosure policy.
