Looking for great growth stocks? Taking a couple of pages out of Warren Buffett’s investing playbook could help you score big wins.
Investors love to get inspiration from Warren Buffett. He has shepherded his holding company, Berkshire Hathaway, to incredible, market-beating returns over time, providing sage advice for followers along the way.
Buffett has famously said that his favorite holding period is forever, and the ideal stock could sit in your account and multiply over many decades. Two Motley Fool contributors picked Amazon (AMZN -0.20%) and Nu Holdings (NU -1.56%) as top Warren Buffett stocks that you could hold forever.
E-commerce plus more
Jennifer Saibil: If you missed the chance to buy Amazon until now, don’t worry. It still has incredible growth opportunities, and it’s not too late to buy Amazon stock and hold it forever.
Amazon spent several years scooping up other e-commerce companies when it was just starting out. It made some moves that may have appeared bold at the time, but the result is a consolidated e-commerce giant that’s unchallengeable. Amazon accounts for more than a third of all e-commerce sales in the U.S., and while it seems to be finished buying out the competition, it’s acquiring all sorts of other companies that expand its revenue streams and make it even more dominant in more fields.
It’s nowhere near done with e-commerce, if only because e-commerce is still getting started. The pandemic brought it more into the mainstream, but it still represents only about 16% of retail sales, according to the Department of Commerce. And that’s expected to grow. The Boston Consulting Group sees e-commerce accounting for 41% of retail sales by 2027, and there’s no one who will benefit more from that kind of shift than Amazon.
Shoppers want the best of both worlds: physical stores and online shopping. Amazon hasn’t been as successful with its physical stores, but it’s not giving up. Along with those efforts, it’s making e-commerce more appealing for customers instead of physical store shopping by accelerating delivery times and offering more products with one-day shipping. It’s also bringing more brand names into its stores to become the department store of the internet, where you can get pretty much everything you need. (Except houses. Maybe one day; who knows?)
That doesn’t even touch on Amazon’s opportunity in cloud services and artificial intelligence (AI). It’s important to mention this first, though, because when you think about a stock you can hold forever, it must have something more than current trends. AI and generative AI could very well turn into something stable and become mainstream, like e-commerce has, but for now, it represents high-growth trends.
Whatever other new trends happen, Amazon is likely to grab part of the market and make itself a leader. It’s done that with several other businesses besides e-commerce and cloud services, like streaming and advertising. That’s why it should be a stock that can reward patient investors forever.
This fast-growing business has what it takes to deliver more wins
Keith Noonan: Nu Holdings is a Brazil-based banking and financial technologies company that provides services in Mexico and Colombia in addition to its home country. The fintech specialist went public in December 2021, and Berkshire Hathaway invested in the company around the time of its initial public offering. Berkshire hasn’t sold a share of the company’s stock since initiating its initial position, and Nu stock currently accounts for roughly 0.5% of Berkshire Hathaway’s total stock portfolio.
Trading at roughly 32 times this year’s expected earnings, Nu has one of the most growth-dependent valuations of any stock owned by Berkshire. On the other hand, the business is serving up results that suggest the stock could still be quite cheap.
Nu closed out the second quarter with 104.5 million customers, representing a growth of 5.2 million customers compared to the previous quarter and a growth of 20.8 million compared to its customer count at the end of Q2 last year. Total banking deposits increased 64% year over year on a currency-adjusted basis to hit $25.2 billion, and its credit card and lending portfolios continued to post strong expansion and overall results. Average monthly revenue per active customer rose 30% year over year in the quarter and 6% on a sequential quarterly basis.
Thanks to strong customer growth and increased engagement, the company’s revenue jumped 65% year over year to $2.8 billion in the quarter. Meanwhile, non-GAAP (adjusted) net income soared roughly 117% year over year to hit $487.3 million.
Nu is already the financial institution with the largest number of active customers and credit operations in Brazil, and it has opportunities to deliver continued growth in its home territories and score dramatic expansion in other Latin American countries. Adoption of banking and other financial services is still in relatively early stages in many Latin American markets, and Nu looks poised to be a big winner as digital banking, loans, and payment solutions continue to gain ground.
For long-term investors looking for ways to capitalize on financial technology opportunities in emerging markets, Nu stock looks like a smart buy-and-hold investment right now.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in Nu Holdings. Keith Noonan has no position in any of the stocks mentioned. 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.
