Warren Buffett knows a thing or two about investing. You could do a lot worse than lean on his portfolio of publicly traded investments to find the next potential addition or two to your portfolio. There are dozens of candidates. Let’s go through two of the names I like at the moment.
Now Holdings (NYSE: NOW) And Sirius XM (NASDAQ: SIRI) are among Buffett’s current assets Berkshire Hathaway stock portfolio. I think they’re crying out for bargains here, so let’s take a closer look at both.
1. Now Holdings
One of Berkshire Hathaway’s most unlikely holdings is Now. Buffett’s appetite for financial services tends to focus on more traditional platforms, but he owns a share of fast-growing Latin American fintech stocks. Brazil-based Nu is the parent company of Nubank, a bankless financial services provider that has taken over its home country over the past decade.
As many as 54% of Brazil’s adult population have a Nubank account. A few years ago it expanded to Mexico and Colombia, but Brazil still accounts for the lion’s share of its sales. Despite Latin America’s volatile inflation and geopolitical risks, Now is delivering the kind of growth Buffett rarely sees from the credit card companies, investment banks and conventional banking institutions he also owns.
The last quarter of Nu was another great achievement. The customer base grew by 20% last year to 99.3 million at the end of March. The lure of the free digital accounts and free credit cards is attractive, but that doesn’t mean it’s a beacon for freeloaders. Nubank customers continue to engage with the platform and its growing range of financial services.
First-quarter revenue rose 64% on a currency-neutral basis to a record $2.4 billion. Yes, revenue is growing more than three times faster than the user base. Many fast-growing fintech startups struggle with profitability, but Nu has now been in the black for seven quarters in a row. The company’s scalability is also highlighted, as net income and adjusted profits more than doubled during the period.
It now trades at 28 times this year’s expected earnings and 19 times next year’s analyst target. It’s not cheap compared to Buffett’s more conventional banking practices, with earnings numbers in the teens or lower. However, Nu’s monster growth has served investors well lately. The stock has almost tripled since the beginning of last year. Sometimes you have to look south for a stock going north.
2. SiriusXM
If you’re looking for a more classic screaming purchase, then it’s time to turn up the volume on Sirius XM. The share of the country’s satellite radio monopoly has almost halved this year. Earlier this month, a new 11-year low was reached.
It’s easy to see why Sirius XM doesn’t have much appeal as a revenue growth story. Revenue growth has been slowing for years, culminating in a marginal decline for all of 2023. Revenue growth has turned positive over the past two quarters, but now hovers around zero. Why pay for premium car stereo when a growing number of vehicles make it easy to broadcast streaming apps through their speakers?
The value here is that Sirius XM is still an active subscription for more than 33 million users. Automakers are still incentivized to push Sirius XM plans by letting drivers simply tether their vehicles to their smartphone apps. The company itself is a huge money generator. Sirius XM has been consistently profitable for years, generating 10-figure free cash flow.
Sirius XM has used the green inflow to aggressively buy back its stock and pay a generous dividend. It currently yields 3.8%. It now trades at just 8 times earnings, which is cheaper than many of Berkshire Hathaway’s more traditional value stocks.
Should you invest $1,000 in Nu Holdings now?
Consider the following before purchasing shares in Nu Holdings:
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Rick Munarriz has positions in Nu Holdings. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
2 Warren Buffett Stocks That Are Screaming Buys Right Now was originally published by The Motley Fool
