Oil prices probably won’t spike, but buy the yen if they do.
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At first glance, Coinbase Global (NASDAQ: COIN) looks like a terrible investment right now.
The stock price has more than tripled in 52 weeks. The cryptocurrency exchange operator’s shares trade at the lofty valuation of 103 times free cash flows and 950 times earnings. I mean, it’s enough to make even seasoned growth investors reach for the smelling salt.
Many investors won’t look any further. Happy to skip this seemingly overvalued crypto stock, they move on to the next idea.
And that could be a big mistake. Coinbase is going through the usual four-year cycle of boom and bust in the crypto space, and the rising bottom-line profits barely clicked above the breakeven line so far.
Let me show you two reasons you should consider making Coinbase your next stock investment.
1. Coinbase runs a sophisticated business
Sure, Coinbase’s stock looks expensive at the moment. The crypto market is waking up from another cold, hard winter, and the whole industry is soaring. Bitcoin (CRYPTO: BTC) is up 138% over the last year, while Ethereum (CRYPTO: ETH) gained 85%. Low-priced altcoins are jumping even higher, led by Solana (CRYPTO: SOL), posting a 730% one-year gain. Coinbase saw a 270% return over the same period, and for good reason.
The company doesn’t build value by holding Bitcoin coins or Ethereum tokens. Its digital currency holdings are minimal and only used to facilitate its customers’ crypto trades as smoothly as possible. Coinbase doesn’t even record changing values in digital assets as a revenue item but as a part of its operating costs.
Instead, it makes money from transaction fees, interest and blockchain rewards, and subscription-style services. You know, pretty much like any ordinary bank, just based on a different set of financial assets. The company’s financial health is more closely related to basic interest in cryptocurrencies than to the price of any specific digital currency.
2. This crypto cycle is not like the others
Coinbase has been around since the early days of crypto. Founded in 2012, with only three cryptocurrencies on the market and one Bitcoin worth less than $7, the exchange has experienced three of Bitcoin’s halving cycles. The fourth one is coming up next week, cutting the rewards for mining Bitcoin in half again. Each halving so far has fueled a dramatic run-up in Bitcoin prices, giving the crypto industry another turn in the spotlight and inspiring larger transaction volumes across different digital coin types.
So, that scenario is about to play out again, but things are different this time. And it’s all about exchange-traded funds (ETFs) tied to Bitcoin’s spot price.
Spot Bitcoin ETFs give investors a radically different way to invest in this newfangled asset class. Instead of opening a new account with Coinbase or some other crypto exchange, learning a different set of trading rules and processes, and taking direct ownership of digital currencies, you can now make Bitcoin trades pretty much like you’d buy or sell an ordinary stock. The Securities and Exchange Commission (SEC) approved 11 applications for this brand-new ETF type in January, and they already manage more than $53 billion of Bitcoin assets.
The expected arrival of spot Bitcoin ETFs inspired an early start to the fourth halving surge. As noted earlier, many cryptocurrencies and related stocks have soared over the last year thanks to halving expectations, ETF plans, and a calmer economic inflation trend. On top of this robust launching pad, Coinbase will record higher trading volumes thanks to the new ETFs.
But wait a minute — why would that be a good thing? Aren’t these ETFs taking away potential crypto-trading volume from the Coinbase system?
Thanks for asking. As it turns out, most ETFs are using a third-party custodian service to execute Bitcoin trades and hold the crypto assets in a secure digital wallet. And nine of the 11 ETFs rely on Coinbase.
“We’re earning revenue, not just on custody, but also on trading and financing,” Coinbase CEO Brian Armstrong said on an earnings call in February, four weeks after the ETF approvals. “Every institution is now starting to hold crypto, the asset class will be a standard part of every diversified portfolio. The financial system is officially adopting crypto. This is really good, and Coinbase is the most trusted partner here.”
So, Coinbase found a new revenue stream while giving the whole crypto market a helpful push. That’s a win-win.
Coinbase is growing into its rich valuation
Coinbase’s valuation shrinks dramatically if you look forward to the incoming market surge. The stock trades at 12 times the average next-year revenue estimate and 108 times earnings projections. And in the last five quarterly reports, the company has exceeded the consensus revenue target by an average of 11% — and earnings have more than doubled the average Wall Street projections.
Past performance is no guarantee of future results, but Coinbase has a proven history of leaving analyst estimates behind — and the company has a unique set of growth-driving balls in the air right now. Keep this up throughout the 12-to-18-month span of the halving cycle’s bullish action, and the current stock price quickly starts to look cheap.
That’s why you should consider picking up a few Coinbase shares now. They will not stay this deceptively cheap forever.
Should you invest $1,000 in Coinbase Global right now?
Before you buy stock in Coinbase Global, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coinbase Global wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 8, 2024
Anders Bylund has positions in Bitcoin, Coinbase Global, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Ethereum, and Solana. The Motley Fool has a disclosure policy.
2 Reasons to Buy Coinbase Stock Like There’s No Tomorrow was originally published by The Motley Fool
We’re officially in a new bull market. And these two stocks could be big winners.
We’ve officially entered a new bull market, and the major stock indices are at or near their all-time highs. There are some excellent businesses that could thrive in a bull market environment, especially if interest rates start to fall. In this video, you’ll hear two of our contributors’ top picks.
*Stock prices used were the afternoon prices of April 8, 2024. The video was published on April 9, 2024.
Matt Frankel has positions in Shopify. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
Matthew Frankel is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.
A million dollars is a big amount, but if you have decades to go before retirement, it is within reach for most investors. The key is finding an investment approach and sticking to it through good markets and bad ones.
Three stocks currently out of favor (two that pay dividends and one that doesn’t) to consider buying and holding and help you attain that $1 million investment goal are Toronto-Dominion Bank (NYSE: TD), landlord Realty Income (NYSE: O), and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Here’s a quick look at each.
1. Toronto-Dominion Bank: Real concerns but overblown risk
Toronto-Dominion Bank, or TD Bank as it is more commonly known, is one of the largest banks in Canada. That country’s banking regulations are very strict, which has resulted in a small number of big banks (like TD Bank) that are effectively protected from new competition. This heavy-handed regulation has also created a conservative ethos within TD Bank and its peers. So, all in, it is a fairly safe bank.
That said, the housing market in Canada has been in a worrying state. First, there was a long rise in home prices, and now the quick rise in interest rates has investors worried that loan defaults will start ticking higher.
TD Bank has an added worry. It was recently forced by U.S. regulators to cancel an acquisition because of concerns over the company’s money-laundering controls. Canada is the bank’s foundation, and its U.S. business was expected to be its growth engine. That engine has just stalled, but it is likely only temporary.
As a result of these concerns, investors have pushed the bank’s dividend yield up to 5%, which is toward its high end historically. Given that the bank has paid a dividend for over 100 years and has North America’s third-highest tier 1 capital ratio, a measure of its ability to weather adversity, the risk here seems modest.
The growth opportunity in the U.S. market, meanwhile, is still quite large even if it takes longer to tap into. Wall Street’s concerns seem like a buying opportunity.
2. Realty Income isn’t exciting, but that’s the point
Realty Income’s 5.8% dividend yield is near its highest levels over the past decade. The investment-grade real estate investment trust (REIT) has increased its payout annually for 29 consecutive years.
That said, this is a slow and steady REIT, not a fast-growing one. But that makes it a good foundational investment on which to layer faster-growing dividend payers like TD Bank and non-payers like Berkshire Hathaway.
What’s perhaps most compelling about Realty Income is its size, given that its $45 billion market cap is roughly three times larger than its next-closest peer among net lease REITs (net leases require tenants to pay most property-level operating costs).
Yes, rising interest rates have been a business headwind, but Realty Income has advantageous access to capital markets thanks to its scale and financial strength. That gives it the capacity to do deals that peers can’t. It is also large enough to be an industry consolidator, having bought two net-lease peers in recent years.
If you reinvest dividends with this slow-growing, high-yield stock, it can provide a solid foundation (if a boring one) for a more diversified portfolio.
3. Berkshire Hathaway is an odd beast
Speaking of giant companies, conglomerate Berkshire Hathaway has its fingers in a vast array of businesses. It owns many, including a large insurance business, a railroad, and energy operations, and it invests in individual stocks, like Coca-Cola and Occidental Petroleum.
But it is probably best known for its CEO, Warren Buffett, whose ethos pervades the company and all of its investments.
What’s interesting here is the success it has achieved over time, focusing on using the huge amount of cash its business generates to invest in other assets. Today Berkshire has a cash hoard of almost $34 billion and short-term investments of nearly $130 billion. All of that available cash is waiting to be deployed into new businesses when the time is right, since Buffett and Berkshire tend to favor investing in a contrarian fashion.
The story at Berkshire has been to buy low and hold on as long as possible. That has worked exceptionally well over the long term even if it has resulted in weak performance over shorter periods of time. Which is why Berkshire Hathaway is the kind of stock that you want to own for decades.
As for the right time to buy, it currently seems reasonably valued with a price-to-earnings ratio and price-to-sales ratio that are both near or below their five-year averages. A fair price is a good one for a company like Berkshire Hathaway.
A balanced mix of assets
Although any one of these stocks is worthwhile, TD Bank, Realty Income, and Berkshire Hathaway together create an interesting mix: a stock for income and growth, another for income alone, and a third for just growth that creates a diverse and balanced portfolio. The key, however, is to buy and hold for a very long time, letting the businesses you own continue growing. That’s what will build your seven-figure nest egg.
Should you invest $1,000 in Berkshire Hathaway right now?
Before you buy stock in Berkshire Hathaway, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 8, 2024
Reuben Gregg Brewer has positions in Realty Income and Toronto-Dominion Bank. The Motley Fool has positions in and recommends Berkshire Hathaway and Realty Income. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
Want $1 Million in Retirement? 3 Stocks to Buy Now and Hold for Decades. was originally published by The Motley Fool
It may surprise investors how much (or little) the new fabs will add to its production capacity.
The Biden administration announced this past Monday that Taiwan Semiconductor Manufacturing Company (TSM -3.18%) will receive a subsidy of up to $6.6 billion from the federal government to support the company’s planned $65 billion investment in building three cutting-edge chip fabrication plants in Arizona. While that sounds like a lot of money, the market’s reaction was tepid. The stock rose by just 1% in that day’s trading session.
That reaction may leave investors wondering whether this agreement makes TSMC stock a buy or whether it does little to change the stock’s value proposition. Let’s dive in and see.
TSMC and the subsidy
The subsidy is a product of the U.S. CHIPS and Science Act, which among other things allocated $53 billion in federal funds to promote the construction of semiconductor fabs on U.S. soil.
Washington has been pushing to expand domestic chip production amid concerns that about two-thirds of third-party chip manufacturing takes place in Taiwan. Considering the threats by China to invade Taiwan and the recent earthquake on the island, anything that increases the share of the cutting-edge chip supply made domestically should improve the peace of mind of Western governments and TSMC’s customers. The sense of relief likely extends to TSMC for many of the same reasons, Previously, it had pledged to build two fabs in Arizona — this deal adds a third.
It’s hard not to see the subsidy as significant in some respects. With this infusion of cash, TSMC now plans to construct three fabs in the Phoenix area for a total cost of $65 billion. Also, the subsidy amounts to more than the $6.3 billion in income the company earned in 2023’s fourth quarter.
The state of TSMC as a company
However, $6.6 billion is a small fraction of the $48 billion TSMC holds in cash and cash equivalents on its books. Moreover, TSMC produced approximately 16 million wafers in 2023, accounting for 61% of all third-party chip production, according to TrendForce.
The company said it would make around 600,000 wafers annually in Arizona when the plan was only two fabs. Assuming that the total output rises to around 900,000 per year with three fabs, it would amount to less than 6% of the company’s current production capacity, so the U.S. will likely continue to heavily depend on Taiwan as a source for advanced semiconductors.
Fortunately for shareholders, the geography of chip production has little effect on TSMC’s investment case. That case has become more compelling amid rising demand for AI-capable chips, which has almost certainly led to increases in orders from chip designers like Nvidia and AMD.
Admittedly, that growth was not well-reflected in last year’s financials for TSMC. In 2023, bottom-line income fell 22% to $27 billion. Still, the analysts’ consensus forecast is for a 22% increase in earnings this year and growth of an additional 23% in 2025.
With those predictions in mind, investors are not looking backward. Over the past year, the semiconductor stock has risen nearly 60%. And although its P/E ratio is 28, that is based on trailing earnings. The company’s outlook for rising income is more meaningful. With a forward P/E ratio of 23, valuation concerns are unlikely to slow the stock’s growth.
Does the subsidy improve the investment thesis for TSMC?
Although the subsidy will reduce a significant fixed cost for TSMC, it is unlikely to greatly affect TSMC stock. True, moving some manufacturing out of Taiwan gives it geographic diversification, and the subsidy allows TSMC to add even more capacity in Arizona. However, with Arizona still likely to account for a relatively small share of TSMC’s manufacturing, the move will change little for the company.
Fortunately for its shareholders, TSMC remains by far the leading third-party chip fab company, with the most advanced technology and the largest market share. As TSMC works to fulfill the world’s demand for AI chips, it should produce strong returns for investors regardless of where it produces its semiconductors.
Will Healy has positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
In Amazon‘s (AMZN -1.54%) annual shareholder letter released on Thursday, CEO Andy Jassy said, “Generative AI may be the largest technology transformation since the cloud … and perhaps since the Internet.” If his excitement about artificial intelligence (AI) was apparent from that statement, he went on to say, “The amount of societal and business benefit … will astound us all.”
There’s no denying that AI has the potential to generate a windfall for companies that get in on the ground floor. You might be surprised to learn that Amazon is one such company. According to Jassy, “much of this world-changing AI will be built on top of Amazon Web Services (AWS).”
Amazon’s all-in on AI
When AI adoption started in earnest last year, many believed Amazon was falling behind, but that narrative is flawed. The company has since unveiled a wide range of AI initiatives across its vast retail and cloud computing empire. It developed specialized processors that run AI models, AI-powered apps to help its e-commerce customers, and conversational digital assistant Q to help AWS users. Amazon also has a $4 billion stake in start-up Anthropic AI, further boosting its credentials.
However, it’s Amazon’s forward-looking strategy that should have AI investors excited. Jassy laid out a vision not focused on creating a killer consumer-facing app — like ChatGPT — but rather focused on providing developers with foundational AI models and the building blocks needed to create customized AI systems to suit their needs.
Amazon also announced that it added renowned AI pioneer Andrew Ng to its board. While Ng might not be a household name, he’s a rock star in AI.
When Alphabet first launched the Google Brain project in 2011 to develop a deep learning neural network to teach AI to recognize images, it was spearheaded by Stanford computer scientist Andrew Ng and noted AI researcher and Google fellow Jeff Dean. The project was wildly successful and is viewed as the catalyst that jump-started modern AI.
Ng offers a wealth of experience that will help Amazon succeed at AI. And at just 3 times sales, Amazon stock offers an attractive valuation.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.
Income-seeking investors have to make an important choice when shopping for stocks to buy. Shares of companies that are likely to raise their dividend payouts at a rapid pace tend to offer low yields upfront. On the other hand, stocks generally don’t offer high yields unless investors feel there’s a low chance the underlying business will raise earnings and in turn their payouts.
Right now, Pfizer (NYSE: PFE) and Altria Group (NYSE: MO) stand out among dividend stocks. Both have raised their payouts every year for over a decade. Plus, they offer yields above 6% at the moment, and there’s a good chance they’ll keep raising their payouts over the long run.
Pfizer
Shares of Pfizer have fallen about 36% over the past 12 months largely because sales of its COVID-19 products fell much faster than expected. Sales of Comirnaty, its COVID-19 vaccine, fell by $26.6 billion last year. Sales of Paxlovid, its antiviral treatment, fell by $17.7 billion in 2023.
Pfizer raised its dividend payout for 15 consecutive years, but it seems the market can’t get over the massive drop in sales last year. At its beaten-down price, shares of the pharmaceutical giant offer investors a 6.3% dividend yield.
Raising its payout in the years to come probably won’t be an issue for Pfizer. If we ignore contributions from COVID-19 products, total sales grew 7% last year.
This year, Pfizer expects earnings to land in a range between $2.05 and $2.25 per share. This is more than enough to support a dividend payout currently set at an annualized $1.68 per share, and raise that payout significantly.
In order to grow their dividend payouts over time, pharmaceutical companies must constantly replenish their lineups of patent-protected medicines. Pfizer invested some of its COVID-19 windfall into the development of new drugs that could allow it to keep growing. In 2023, the company earned approvals from the Food and Drug Administration (FDA) for nine new drugs.
At recent prices, you can scoop up Pfizer shares for just 12.5 times the midpoint of management’s earnings expectation for 2024. This is a great price to pay for an established business likely to grow annual earnings by a mid-single-digit percentage for the next several years. Adding some shares to an income-generating portfolio looks like a smart move right now.
Altria Group
Shares of Altria Group, the company that sells Marlboro cigarettes in the U.S. market, offer an eye-popping 9.3% dividend yield. The company has raised its payout 58 times in the last 54 years. The stock has fallen about 13% over the last 11 months because investors are worried about a faster-than-usual decline in combustible cigarette sales.
The amount of nicotine consumed in the U.S. isn’t shrinking, but consumers are shifting away from combustible cigarettes at an alarming rate. Altria shipped 76.3 billion cigarettes in 2023, which was 9.9% less than it sold a year earlier.
Despite the steeper-than-usual decline in combustible cigarettes, Altria reported adjusted earnings that grew 2.3% last year to $4.95 per share. That’s more than it needs to cover a dividend payout currently set at $3.92 annually.
The FDA banned flavored vaporizers in 2020, and the illicit market is a major challenge for Altria Group. This probably isn’t an issue the tobacco industry can’t overcome with help from the government. Late last year, the FDA and Customs and Border Protection teamed up to seize 41 shipments of unauthorized e-cigarette products. So far this year, it’s issued warning letters to 19 online retailers and 61 brick-and-mortar retailers for selling unauthorized e-cigarette products.
Increasing enforcement of the FDA’s flavored e-cigarette ban could draw heaps of customers to Altria Group’s new e-vapor product. Last year, it acquired NJOY, which markets the only pod-based e-cigarette system authorized for sale by the FDA. Adding some shares to a portfolio now could produce heaps of passive income over the long run.
Should you invest $1,000 in Pfizer right now?
Before you buy stock in Pfizer, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pfizer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 8, 2024
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
2 High-Yield Dividend Stocks You Can Buy Now and Hold Forever was originally published by The Motley Fool
In many ways for many investors, Coca-Cola (NYSE: KO) is a model dividend stock. The company is a Dividend King, meaning it has raised its shareholder payout at least once annually for a minimum of 50 years. Its current streak stands at a hard-to-conceive 62 straight years.
Coca-Cola management is well aware that the dividend is a big part of the stock’s attraction. That’s probably a key reason it raised the payout by a relatively high 5%-plus back in February. Let’s take a closer look at that raise and whether it indicates the company is a relatively flat investment these days — or still has enough fizz to make it a worthy buy.
A fizzy drink, and a fizzy business
While Coca-Cola is most often associated with its signature beverage, it’s important to note that as a business it’s much more a collection of drink brands.
Many consumers, and even investors, don’t realize that in addition to the various versions and flavors of Coke the beverage, the company also holds such familiar items as Minute Maid orange juice, Schweppes soft drinks and mixers, and Powerade sports beverages in its portfolio. In certain European city centers, the company’s Costa Coffee chain isn’t far away from Starbucks levels of ubiquity.
No other business on this planet has that kind of lineup; Coca-Cola doesn’t hesitate to boast that it holds over 200 brands of drinks. That sets it apart from the company many consider to be its archrival, PepsiCo, as the latter’s portfolio is stuffed with both beverages and snack foods.
For Coca-Cola, it almost goes without saying that Coke the drink is the 800-pound gorilla of its product selection. Yet, that dizzying array of other drinks gives it the room to push a popular beverage category, or a single hot product, in order to juice (pun intended) its fundamentals.
And since Coke is eternally beloved by many consumers throughout the planet, the company can also kick its prices a bit higher if it needs a jolt to the fundamentals.
With these strengths, Coca-Cola usually finds a way to grow despite its size and maturity as a company. Revenue rose by more than 6% last year over the 2022 tally, to almost $46 billion, and was up by nearly 40% if we place it against the 2020 result.
Profitability has wobbled a bit, but usually comes in strong. This is a disciplined company that sells a hugely popular good that’s cheap to make. Its nearly $46 billion in revenue across 2023 filtered down into a headline net income of $10.7 billion, for a very sugary margin of over 23%. That’s consistent as Coca-Cola’s net margin has hovered within a tight band of 22% to 25% over the past five years.
Meanwhile, the company’s free cash flow (FCF) is a thing of beauty. It isn’t growing as consistently as revenue, but that’s not much of a worry since it’s landed just shy of $10 billion in each of the past two years. That’s more than enough to fund the dividend, which cost the company a bit under $8 billion in 2023.
But is it a good buy?
Stocks, of course, trade on future potential and valuations far more than historical performance. Coca-Cola’s growth is expected to flatten a bit this year, with the average analyst projection of only marginal growth. 2025 should be better, as those prognosticators are modeling a nearly 5% jump on the top line. Profitability looks a little tastier, given that the collective estimate for 2024 per-share net income growth is 4% this year and nearly 7% in 2025.
As for valuations, Coca-Cola stock currently trades at a forward P/E of nearly 24, which on first glance might seem rich given that anticipated single-digit growth. Yet we also have to factor in that dividend, which the company is unlikely to stop increasing and already boasts an attractive yield of 3.2%, well above the average for the S&P 500 index, of which it’s a component.
So for me, this is a fine stock for the buy-and-hold types out there. I can’t foresee this company ever losing money, and the stacks of cash flow it can produce should allow it to maintain its Dividend King status for a long time to come. I’ve been a Coca-Cola bull for years now, and I don’t see that changing anytime soon.
Should you invest $1,000 in Coca-Cola right now?
Before you buy stock in Coca-Cola, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $522,969!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 8, 2024
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.
Is Coca-Cola Stock a Screaming Buy After Its Big Dividend Raise? was originally published by The Motley Fool
Even with $300, many Buffett investments are within reach of the average investor.
Warren Buffett became one of the world’s best-known investors through his long track record of consistency. Since 1965, his portfolio has earned an average yearly gain of 20%, approximately double that of the S&P 500.
However, with Buffett now in his 90s, many investment decisions are in the hands of his lieutenants, Todd Combs and Ted Weschler. This has changed the philosophy of Berkshire Hathaway a bit, and to that end, it incorporates more growth stocks.
Consequently, investors — even with a modest budget of $300 — can find some intriguing growth stocks in the Berkshire portfolio that could deliver market-beating returns over time.
Amazon
Berkshire did not buy Amazon (AMZN 1.67%) until 2019. As to why it took so long to buy, Buffett said he was “too dumb” to buy Amazon earlier. He was long skeptical of tech stocks but, in time, came to realize the staying power of such businesses.
Now, Amazon is the world’s second-largest retailer, according to the National Retail Federation. Moreover, it pioneered the cloud computing business through Amazon Web Services (AWS), a segment that now accounts for most of the company’s operating income.
Additionally, it operates fast-growth businesses such as digital advertising, online seller services, and its subscription service, known to the public as Amazon Prime. They helped generate revenue of $575 billion in 2023, a 12% increase from last year. This made it a highly diversified business that investors can buy for around $185 per share right now.
Admittedly, Amazon’s forward price-to-earnings (P/E) ratio of 44 may appear expensive, considering that investors often associate Buffett with finding bargains. Still, investors should remember that Amazon has always sold at a high multiple, and the portfolio has sought more expensive stocks since Buffett handed off some investment decisions to others.
Ultimately, with a comparatively reasonable valuation and its diverse business lines, it should remain a stock that serves Buffett and other investors well.
Nu Holdings
NuBank parent Nu Holdings (NU -0.17%) is one of the world’s largest online banks, but since it only operates in Brazil, Mexico, and Colombia, it is likely not on the radar of most investors. Nonetheless, it probably should be, and not just because Berkshire was an early investor in this business.
Nu presents a unique opportunity since just a few institutions had previously dominated banking in this region. For that reason, a large percentage of the population did not have a bank account or credit card. Nu has changed this by issuing the first credit card to millions of Brazilians. Now, 53% of all adult Brazilians (88 million of Nu’s 94 million customers) have at least one account with Nu.
Additionally, the company is now repeating this formula in Mexico and Colombia, meaning its rapid growth can continue. So fast is this growth that the company’s $8 billion in revenue for 2023 grew 68% over the previous year.
Moreover, with the stock at around $12 per share, investors can not only buy a few shares with a $300 budget but also buy at levels just above its IPO price from late 2021. Furthermore, at a forward P/E ratio of 31, the shares are priced reasonably when considering the outsized revenue growth of this fintech stock.
DaVita
DaVita (DVA -0.50%) is probably not a company most investors think of as a growth stock. It offers kidney dialysis to more than 200,000 patients in the U.S. and 10 other countries.
However, the need for such services never disappears, making it the type of business that has always drawn Buffett’s attention. Additionally, approximately 10,000 baby boomers age into Medicare every day, and chronic kidney disease affects about 34% of U.S. adults aged 65 or older. While that may serve as a warning to watch one’s kidney health, it also means a growing customer base for DaVita as kidney disease rises.
Admittedly, considering that its 2023 revenue of $12 billion grew by only 5%, it may not look like much of a “growth” business. Nonetheless, the stock has been in a state of recovery as excess deaths (due to COVID-19) and missed appointments weighed on its performance for most of 2022, and rising labor costs have remained an ongoing challenge.
Moreover, analysts expect its cost-cutting to boost net income by 21% in 2024. Thus, considering its P/E ratio is around 18, the stock is arguably a bargain. Also, with the stock trading at about $135 per share as of the time of this writing, investors with a $300 budget can afford its shares. Investors who follow Buffett’s lead will likely continue to profit from this healthcare stock.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy has positions in Berkshire Hathaway and Nu Holdings. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
Dell Technologies is a much larger company than Super Micro Computer, but that doesn’t automatically make it a better investment.
Fool.com contributor Parkev Tatevosian compares Dell Technologies (DELL -0.29%) and Super Micro Computer (SMCI 0.48%) to answer which is the better buy for investors looking to capitalize on the artificial intelligence (AI) trend.
*Stock prices used were the afternoon prices of April 8, 2024. The video was published on April 10, 2024.
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
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