Warren Buffett, an American businessman and philanthropist, is regarded by many as the world's most successful investor. Buffett's holding company, Berkshire Hathaway (BRK.B), has focused its investment strategy on finding businesses with strong fundamentals and holding them indefinitely.

In a letter to shareholders in 1988, Buffett stated, “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” Two such businesses are Amazon (AMZN) and Apple (AAPL). While Amazon makes up 0.5% of Berkshire's holdings, Apple accounts for 46.4%.

Both companies boast strong customer loyalty and are financially well-positioned. While Apple's consumer products are highly favored over others in the market, Amazon dominates e-commerce and cloud computing. In the last 10 years, Amazon’s shares have soared a staggering 834%, while Apple’s shares have gained an eye-catching 907%. 

All of Amazon’s Businesses Are Flourishing

Amazon has come a long way from being just another online shopping destination to the e-commerce-slash-tech titan it is today. Its diverse range of services includes online retail, entertainment, and cloud computing. Valued at $1.7 trillion, Amazon’s shares are up 13% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 4.5%.

The company not only dominates the e-commerce space, but its cloud segment, Amazon Web Services (AWS), now has the biggest market share in global cloud computing. According to Statista, AWS makes up 32% of the cloud market, with Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud in the second and third positions, respectively.

AWS continues to be a key factor driving growth. In its recent fourth quarter, AWS generated $24.2 billion in sales, an increase of 13% year-over-year. Amazon’s strategic partnership with AI start-up Anthropic could further improve AWS’s capabilities. 

Notably, total net sales reached $170 billion, rising 14% from the prior-year quarter. Net income for the year came in at $2.90 per share, compared to a net loss of $0.27 per share.

Advertising is another growth driver for Amazon. The company’s decision last year to include limited ads on Prime Video will help boost advertising revenue in the coming quarters. For 2023, revenue from advertising increased to $46.9 million from $37.7 million in the prior year. 

Amazon’s free cash flow balance stood at $36.8 billion for the trailing twelve months, which should allow the company to fund artificial intelligence (AI) projects and acquisitions, if any, in the near future.

Analysts predict Amazon’s revenue will surge by 11.5% year-over-year to $641.2 billion in 2024. Earnings are expected to surge by a whopping 42% to $4.11 in 2024.

Trading at 41 times 2024 earnings, Amazon seems pricey. However, it may be worthwhile to pay the premium, if you believe the company's long-term growth prospects in e-commerce and cloud computing will be exceptional as AI advances. 

Wall Street rates AMZN a “strong buy” overall. Out of the 45 analysts covering AMZN, 41 rate it a “strong buy,” three analysts recommend a “moderate buy,” and one says it is a “hold.” The average price target stands at $194.88, which implies about 14.4% potential upside from current levels. Its high target price of $230, however, indicates the stock can soar as high as 35% by the end of 2024. 

Apple Will Likely Maintain Its Market-Dominating Status

Apple, valued at $2.8 trillion, is one of the world's most popular and favored technology companies. Its products have a large following and unwavering loyalty that appear unbeatable. The majority of iPhone users continue to upgrade their devices while gravitating toward other Apple products. 

AAPL stock has slipped about 2% YTD, compared to the Nasdaq Composite's ($NASX) gain of more than 4%.

Its much-anticipated launch of Vision Pro, a spatial computer, last week in the U.S. appears to have enticed customers. During the Q1 fiscal 2024 earnings call, CEO Tim Cook described it as a "revolutionary device built on decades of Apple innovation, and it's years ahead of anything else." The base model costs $3499, which is quite expensive. We'll have to wait and see how it drives revenue for the company in the coming quarters.

In the first quarter ended Dec. 30, Apple’s revenue jumped just 2% year-over-year to $119.6 billion, while earnings surged 16% to $2.18 per share. Apple’s installed base of active devices has now crossed 2.2 billion globally. iPhone revenue jumped 6% to $69.7 billion. Management discussed that a study by Kantar showed that iPhones were “4 out of the top 5 models in the U.S. and Japan.”

Apple intends to integrate AI further and invest in new products. At the end of the quarter, it had $173 billion in cash and marketable securities, with a total debt of $108 billion. The company had a free cash flow balance of $37.5 billion and returned $27 billion to shareholders during the quarter. Apple also declared a quarterly cash dividend of $0.24 per share, due in February.

Analysts predict Apple’s revenue and earnings to grow by 1.3% and 6.9%, respectively, in fiscal 2024. Currently, the stock trades at 28 times forward earnings, compared to its five-year price-to-earnings average of 24x. 

Given Apple's projected growth, its valuation appears steep. However, it still has plenty of room to grow and expand its business with the help of AI. With its solid reputation, customer loyalty, and high-quality products, Apple has the potential to generate significant long-term returns.

Turning to Wall Street, analysts rate AAPL stock a “moderate buy.” Out of the 28 analysts covering the stock, 16 rate it a “strong buy,” three rate it a “moderate buy,” eight recommend a “hold,” and one rates it a “strong sell.” The average analyst target price of $206.54 implies an upside potential of 9.2% from current levels. What’s more, AAPL’s high target price of $250 implies an upside of 32% over the next 12 months.