You could have made a lot of money over the years by following Warren Buffett’s stock picks. He invested early in many iconic companies, including American Express And Coca-Cola. But he has also shown an ability to profit from already huge companies, such as his more recent investment in Apple.
What are Buffett’s best ideas right now? Three stocks in particular stand out.
This could be Buffett’s next superstar stock
Very often, companies operating outside the US fall under the radar, even though those companies are listed on US stock exchanges, run by US founders and backed by US investors. Now Holdings (NYSE: NOW) is a primary example.
This fintech company has a market cap of $60 billion and over 100 million users, but most Americans have never heard of it. That’s because it operates exclusively in Latin America, home to over 650 million people. If you’re looking to invest in a company with decades of growth ahead of it, Now is for you.
The company started in 2013 after co-founder David Vélez, then a member of Sequoia Capital’s investment team, saw a huge opportunity in the Latin American banking sector. For years, the region’s banking sector was dominated by a handful of powerful incumbents who charged customers high fees for simple services. Nu’s strategy was simple: bypass the existing financial system by offering low-cost financial services directly via a smartphone.
In 2014, the company had virtually no customers. Today it has more than 100 million people, including more than half of all Brazilian adults.
Sales continue to grow by double digits every year and there is little competition to slow Nu’s rise. In recent years it has entered the Colombian and Mexican markets, with hundreds of millions of additional Latin Americans as potential customers.
According to Berkshire HathawayAccording to recent filings, Buffett’s holding company currently owns about 107 million shares worth about $1.3 billion. Buffett has owned the stock since the company’s initial public offering (IPO) in 2021. So far, he hasn’t sold a single share. Putting $10,000 to work by buying Now shares is a great way to track this Buffett stock with decades of growth ahead.
Bet on these great companies
What should you do with your remaining $20,000? Consider splitting it evenly between Visa (NYSE: V) And MasterCard (NYSE:MA) shares. These two companies were among Buffett’s best investments this century, and it’s not hard to see why.
Visa and Mastercard are competitors, of course. But it’s not that simple. Together, these two companies control 86.5% of the US credit and debit card market. Only two companies make up the rest of the market.
This extreme market consolidation makes sense. The payments industry is all about networking. Merchants should accept what customers can pay, and customers should pay with something merchants can accept. The result is a natural consolidation of the industry.
Both Visa and Mastercard are considered asset light companies because the majority of their business is software, which is infinitely scalable at very low cost. This typically results in higher profit margins as the business grows.
This is exactly what we have seen. Since 2010, Visa and Mastercard’s profit margins have gone from around 30% to 35% to between 45% and 55%. In short, this is a type of business that only gets stronger over time.
The best option is probably to split an investment in both. This way, you diversify your investment away from the actions of one company and instead bet on the natural dynamics of the industry over the long term. That’s exactly what Buffett has done. According to the latest filings, Berkshire Hathaway currently owns $2.3 billion in Visa stock and $1.9 billion in Mastercard stock.
Don’t have $30,000? No problem. Try starting with $3,000. Even $300 will do. The main goal should be to put your money to work in high-quality businesses like these. Then, as Buffett often does, you can increase your stake over time.
Should You Invest $1,000 in Nu Holdings Now?
Consider the following before purchasing shares in Nu Holdings:
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American Express is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Mastercard and Visa. The Motley Fool recommends Nu Holdings and recommends the following options: long Jan 2025 $370 calls on Mastercard and short Jan 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
The Best Warren Buffett Stocks to Buy Now With $30,000 was originally published by The Motley Fool
