Warren Buffett's Berkshire Hathaway has purchased a stake in Amazon for the first time, as the billionaire's aversion to a tech sector that has driven the decade-long bull market on Wall Street thaws.
The 88-year-old said that one of his two investment protégés at Berkshire, Todd Combs and Ted Weschler, made the decision to buy shares in Amazon, which as well as being the world's largest online retailer is one of the biggest players in cloud computing.
"One of the fellows in the office that manage money . . . bought some Amazon so it will show up in the 13F" later this month, Buffett told CNBC, referring to Berkshire's quarterly report to the Securities and Exchange Commission in which it details its equity holdings.
Buffett, whose 54-year investment career has made him one of the richest men in the world, has previously hailed Amazon founder Jeff Bezos and last year Berkshire announced a joint healthcare venture with Amazon and JPMorgan Chase.
"Yeah, I've been a fan, and I've been an idiot for not buying," Buffett told CNBC. It was not the first time the billionaire investor rued his decision not to invest in Amazon sooner. Two years ago he told investors that the stock "always looked expensive and I didn't think he [Bezos] would be where he is today".
Shares in Amazon, which have more than doubled since the start of 2017, rose more than 3 per cent in early trading on Friday. Buffett did not say how many shares of Amazon Berkshire had bought.
The news of the investment comes ahead of Berkshire's annual shareholder meeting this weekend in Omaha, when tens of thousands of investors head to the Nebraska city to hear the billionaire and his longstanding business partner, Charlie Munger, opine on their investment strategy and views of the world.
Berkshire's embrace of Amazon underlines how the company's longstanding aversion to the technology sector — a sector Buffett has claimed was outside his circle of competence — is disappearing.
An ill-fated 2011 investment in IBM was Berkshire's first bet on tech and was followed five years later, and on a much larger scale, with the purchase of shares in iPhone maker Apple.
Before then, the company's stock bets were dominated by banks and other financial services and consumer goods groups such as Coca-Cola.
Warren Buffett: 'I'm having more fun than any 88-year-old in the world'
Mary Holm: Finding a KiwiSaver investment that will bear the most fruit
Apple was the largest single holding in Berkshire's US$173 billion ($260.3b) equity portfolio at the end of last year, with a stake valued at more than US$40b. Buffett has pointed to Apple's strong profitability as one of the reasons to bet on the company. By contrast, Amazon's shareholders have allowed Bezos to expand aggressively at the expense of delivering consistent profits.
The patience afforded to Bezos is starting to pay off. Amazon reported a record US$3.6b profit in the first quarter, although its pace of sales growth had slowed. To solidify its dominance of the online retail market, Amazon is spending hundreds of millions of dollars to cut shipping times to a single day for some members.
Buffett's experience in investing in technology companies has not always been positive. Last year he dumped the last of his stake in IBM, blaming some of the troubles at the company on Amazon.
"I was too dumb to realise what would happen," Buffett said in 2017, in reference to the rise of Amazon's cloud computing business. "I have admired Jeff for a long, long time but I did not think he could succeed on the scale that he has."
Buffett told the FT in an interview last week that he has struggled to find investments that could make a meaningful impact to Berkshire's bottom line given the conglomerate has US$700b in assets, with US$112b of that in cash and cash-like securities.
For nearly 30 years from 1979 Berkshire outperformed the US market by more than 12 per cent on average per year, but since October 2008 its performance has lagged behind the wider market.
The company this week signed a deal to pump US$10b into Occidental Petroleum to fund the oil and gas company's US$55b takeover of rival Anadarko. Buffett, who has not commented on the deal, is likely to receive questions on the capital injection on Saturday.
Written by: Philip Georgiadis, Myles McCormick and Eric Platt
© Financial Times