Warren Buffett’s stock picks may be anything but flashy, but that’s kind of the point. Given enough time, value performs. And in the case of Buffett’s Berkshire Hathaway, it often outperforms. You’d be wise to borrow some of his ideas whenever possible.
To this end, here’s a closer look at three Berkshire holdings you may want to make a point of adding to your own portfolio this month as well.
1. Visa
Berkshire Hathaway doesn’t hold a massive stake in credit card company Visa (NYSE: V), for the record. Its 8.3 million-share position is only worth about $2.3 billion. That’s less than 1% of the total value of Berkshire’s stock holdings (and less than 1% of Visa itself).
Don’t mistake this relatively small position as a sign that this company’s potential is limited, though. The payments market isn’t just moving away from cash. It’s embracing digital ecosystems like the ones Visa can provide to merchants and institutional clients.
Case(s) in point: Earlier this year, this payment middlemen introduced platforms specifically built for Latin America’s governments. These tools include a means of collecting tax revenue, streamlining purchases of government property, and even making public disbursements like stimulus payments or social assistance.
Also earlier this year, Visa unveiled technology allowing merchants to not only accept card-based payments, but build their own customer-loyalty programs. Each such tool expands Visa’s breadth and depth, ultimately extending its reach and revenue.
And the numbers confirm as much. While the global economy’s been rather lethargic this year, Visa’s third-quarter revenue was up 10% year over year on a 7% increase in total payment volume, extending trends that have been underway for a year. That’s not huge, but it clearly outpaces worldwide economic growth.
Analysts expect this top-line growth pace to persist at least a couple more years, too, although given the scope of the opportunity to displace other forms of payments (in addition to introducing new profit centers that help merchants better connect with consumers), this growth could conceivably last for years.
That past and projected revenue growth, by the way, is driving even faster earnings growth. This is a high-margin business that scales up very cost effectively.
2. Occidental Petroleum
It would be easy to put oil and gas stocks like Occidental Petroleum (NYSE: OXY) on the shelf to be forever forgotten, particularly given this stock’s — along with crude oil’s — recent pullback. Not only are environmentally friendlier alternatives now available, but crude’s 20% tumble just since April is a reminder of how easily this business can be rattled and then unrattled by unpredictable geopolitical tensions. It’s just not worth it.
Except, maybe it is worth it — at least to Warren Buffett. There’s a reason Berkshire is not just sticking with it, but keeping Occidental as its sixth-biggest position, currently worth on the order of $13 billion. That reason is that oil (and gas) is hardly on its deathbed just yet.
Don’t misread the message. Alternatives like solar and nuclear power are here to stay. Even in the relatively advanced United States; however, fossil fuels still account for about 60% of our total utility power production, according to the U.S. Energy Information Administration, while renewables only generate roughly one-fifth of it. Factoring in automobiles, crude oil alone accounts for more than one-third of the country’s annual energy consumption, with natural gas making up more than another third.
Connecting the dots, it could take years for alternative energy sources to displace oil as the nation’s primary source of power, particularly given the ever-growing need for electricity. Assume the same applies in other parts of the world too.
To this end, the United States’ Energy Information Administration believes crude oil alone could still be the planet’s single-biggest source of power as far down the road as 2050. There’s a lot of money to be made by drilling, extracting, and refining oil in the meantime.
There are obviously several solid oil and gas stocks that would work just fine for your portfolio. Buffett’s partial to Occidental Petroleum and its management team, however. As he wrote in 2023’s annual letter to Berkshire Hathaway shareholders:
“Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners. No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and to her country.”
It might be wise to just trust Warren Buffett’s personal judgment on this one.
3. Nu Holdings
Finally, add Nu Holdings (NYSE: NU) to your list of Warren Buffett stocks to buy hand over fist in October. It’s not a household name. In fact, there’s a good chance you’ve never even heard of it. Don’t let your lack of familiarity dissuade you, however.
There’s a reason you’ve never heard of it. It’s because Nu Holdings is an online bank built to serve the Latin American market. It already boasts over 100 million customers spread across Brazil, Mexico, and Colombia, although that still only scratches the surface of the ultimate opportunity. South and Latin America is home to over 600 million people, most of whom have only recently been given reason to explore such options.
And that’s key to understanding Buffett’s interest in this seemingly unlikely Berkshire Hathaway holding.
In short, Latin America is now in many ways where North America was 20 years ago. High-speed internet was still young then, and smartphones were relatively uncommon. We were on the verge of a game-changing intersection of both technologies though, which would put shopping, entertainment, banking, and information in everyone’s hands via a mobile device.
Perhaps the biggest difference between here and there is just that Latin America is evolving as a “mobile first” market, meaning most of its consumers use their smartphones as their primary web connection.
Whatever the case, it’s a market that’s primed for Nu Holdings’ offerings. Market research outfit Technavio suggests the region’s banking-as-a-service market is poised to grow at an annualized rate of more than 19% per year through 2028, jibing with other forecasts.
And Nu is clearly already capitalizing on this growth. Last quarter’s currency-adjusted revenue improved 65% year over year, more than doubling net income as a result.
It’s not a huge position for Berkshire Hathaway. As of the latest look, Berkshire’s only holding a little less than $1.5 billion worth of the overseas online bank. But the fact that Buffett and his lieutenants own any of this off-the-radar company at all, however, speaks volumes about its potential.
Should you invest $1,000 in Nu Holdings right now?
Before you buy stock in Nu Holdings, 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 Nu Holdings 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 $752,838!*
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 September 30, 2024
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Visa. The Motley Fool recommends Nu Holdings and Occidental Petroleum. The Motley Fool has a disclosure policy.
3 Warren Buffett Stocks to Buy Hand Over Fist in October was originally published by The Motley Fool
