Investment titan Warren Buffett has good reason to regret not buying Amazon when it first went public — as do most investors.
Had the average Joe decided to save $5,000 and spend it on Amazon’s stock when it first hit the public markets 20 years ago, they be worth at least $2.4 million today.
While those returns would have made the average Joe quite happy, $2.4 million would’ve hardly been noticeable in Buffett’s now $72 billion net worth. Moreover, the investor has typically made much larger investments in companies he considers worthy. When Buffett first invested in Wells Fargo in 1990 for instance, Buffett decided to put $290 million into the banking giant.
So imagine an alternate reality in which the Oracle of Omaha decided to take the leap and invest in Amazon in its early days. In that world, Buffett decided to put say $50 million in company on Thursday, May 15, 1997 — the day Amazon it debuted on the Nasdaq. Today, that same stake would be worth $24.4 billion as the company’s shares have grown some 488 times.
The value of Buffett’s alternative universe stake in Amazon (assuming he personally invested in it) would have helped him beat out Bill Gates, Amazon CEO Jeff Bezos, and Spanish businessman Amancio Ortega Gaona today, to become the world’s wealthiest man with some $96 billion to his name. Gates is currently worth some $87 billion.
In reality of course, it would have been quite difficult for Buffett, or any investor for that matter, to buy about $50 million of Amazon’s stock on the day of its IPO. The company’s IPO sought to raise only about $54 million for a market value of about $440 million at the time.
Meanwhile, Amazon’s stock performance over those 20 years would have been trying for any investor — even one who thinks as long term as Buffett. For two years following Amazon’s public debut, the euphoria and hype that defined the dot-com bubble helped heat Amazon’s valuation up 8,162% to $36.4 billion.
By late 2001, though, the rose-colored glasses were off. A series of dot-com companies, including Pets.com had closed their doors, fanning concerns that investors had been too eager in their search for a fast growing company. Amazon, which had yet to turn a profit at the time, was no exception to the jitters. The company’s market cap shrank to some $2.2 billion in 2001, while Bezos remarked at the time that “we are not a stock you can sleep well with at night.” It would be another six years before Amazon’s market cap recovered to its pre-crash high.
While Buffett has repeatedly said not investing in Amazon was a mistake, he has yet to show signs of wanting to buy the stock now. And buying Amazon now isn’t an easy decision to make. Amazon has grown fast and large—raising questions about how long the company can continue at its current rate. Now the company worth $457.9 billion in market cap, with revenue of $136 billion in 2016. That’s up 7 times from its $17 billion revenue some 20 years ago.
Even if growth slows for Amazon though, it is still one of the companies with potential to become the world’s first $1 trillion company, according to Wall Street.