In the event you kind the phrase “worth investor” into your favourite search engine, there is a good probability that you will get loads of outcomes referring to Berkshire Hathaway (BRK.A -2.84%) (BRK.B -2.44%) CEO Warren Buffett. Whereas the famously profitable moneyman is nearly synonymous with worth investing, his funding conglomerate additionally owns fairness positions in some riskier, doubtlessly extra explosive progress shares. 

With the Nasdaq Composite index nonetheless down roughly 29% from its excessive and deep in bear market territory, now may very well be a great time for risk-tolerant buyers to construct positions in beaten-down progress shares with the potential to ship market-crushing long-term returns. Learn on for a take a look at two shares within the Berkshire portfolio that appear like nice progress performs on the heels of massive valuation pullbacks.

Picture supply: The Motley Idiot.

1. Snowflake 

Buying and selling at a doubtlessly daunting 15.6 instances anticipated ahead gross sales and barely producing earnings on a non-GAAP (adjusted) foundation, Snowflake (SNOW -0.17%) is farther away from the standard value-investing mould than every other inventory within the Berkshire Hathaway portfolio. 

SNOW PS Ratio (Ahead) knowledge by YCharts

Berkshire’s Snowflake place can be uncommon within the sense that the funding conglomerate bought shares main as much as the corporate’s preliminary public providing (IPO) in September 2020. It then bought shares on the firm’s IPO debut worth — one thing a Buffett-led firm hadn’t achieved since Ford Motor Firm made its public debut in 1956. 

Whereas Berkshire has but to supply an in depth rationale for its seemingly uncharacteristic funding in Snowflake, it appears just like the transfer was pushed by Berkshire portfolio supervisor and GEICO CEO Todd Combs. GEICO, which is a subsidiary of Berkshire Hathaway, has been a buyer of Snowflake’s, and Combs was apparently fairly impressed with the information companies firm and wished to be an early investor.

Snowflake’s Information Cloud is a data-warehousing platform that makes it doable to mix and analyze data that’s generated from in any other case walled-off cloud-infrastructure companies. Whereas the corporate has a extremely growth-dependent valuation, it’s increasing quickly and posting sturdy free-cash-flow margins. The corporate grew product income by 70% yearly final yr and posted an adjusted FCF margin of 25%, and it expects to develop gross sales by roughly 40% with the identical FCF margin this yr.

Snowflake is a pick-and-shovel play on the evolution of cloud companies and knowledge analytics. With the corporate rising rapidly and doubtlessly constructing a robust moat and the inventory buying and selling down roughly 65% from its lifetime excessive, the information specialist appears like a worthwhile long-term play for risk-tolerant buyers.

2. Amazon

Amazon (AMZN 1.39%) has already confirmed to be one of the vital disruptive firms in historical past. Not solely has it formed the e-commerce and cloud-infrastructure companies markets, nevertheless it’s additionally quickly constructed a robust place within the digital promoting area. 

Between buyers usually giving progress shares the chilly shoulder in gentle of macroeconomic pressures and business-specific pressures impacting efficiency, Amazon inventory is dealing with one thing of an ideal storm proper now. The corporate’s share worth is down 44% during the last yr and trades down 49% from its excessive. 

Along with rising prices impacting margins for its core e-commerce and cloud companies companies, Amazon is seeing its gross sales progress decelerate considerably. Whereas the corporate noticed report income of $514 billion final yr, gross sales have been up solely 9% on an annual foundation. With steering for income to return in between $121 billion and $126 billion on this yr’s first quarter, suggesting roughly 6% year-over-year gross sales progress, it appears just like the enterprise may very well be on monitor for a mid-to-high single-digit gross sales improve in 2023.

Little question about it, current gross sales momentum has appeared paltry compared to the degrees that the corporate’s long-term shareholders and inventory watchers had change into accustomed to. Alternatively, the market appears to be overly fixated on short-term pressures dealing with the enterprise, and Amazon’s valuation has been pushed all the way down to a degree that presents a beautiful mixture of worth and progress potential. 

AMZN PS Ratio knowledge by YCharts

With the corporate valued at lower than 1.9 instances trailing income, Amazon has not often appeared cheaper on a price-to-sales (PS) foundation during the last decade. Based mostly on ahead estimates the tech big trades at roughly 1.74 instances this yr’s anticipated gross sales.

Whereas gross sales progress has slowed dramatically, evaluating the energy of the enterprise as we speak to the final time it traded at comparable (PS) multiples means that shares are undervalued at as we speak’s costs. Amazon’s profit-driving cloud enterprise has grown by leaps and bounds for the reason that center of the final decade, and it has seen its proportion of total gross sales greater than double to hit 14% regardless of continued progress for the e-commerce enterprise.

The e-commerce and cloud-services chief faces the pressure of macro pressures proper now, however the firm nonetheless appears very sturdy, and there is a good probability that it’ll ultimately take pleasure in a extra favorable working backdrop. For long-term buyers searching for progress shares with engaging risk-reward profiles, Amazon appears like an amazing purchase.