Investors looking for alpha in an uncertain market environment could do worse than following in the footsteps of legendary stock pickers, and probably none can match Warren BuffettCall. It is not for nothing that the “Oracle of Omaha” is considered one of the greats and for almost 60 years, between 1965 and 2022, the returns of his company Berkshire Hathaway have doubled those of the S&P 500.
So it’s definitely worth browsing through Buffett’s portfolio to see what stocks he currently owns. And when some of these stocks are also backed by one of Wall Street’s top banks like Morgan Stanley, it sends an even stronger signal that these names might be ripe for picking.
With that in mind, we opened up the TipRanks database to pull the details on a pair of stocks rated favorably by these two investment institutions. Here are the facts.
Nu Holdings (NOW)
Warren Buffett hates bitcoin, right? Maybe so, but interestingly he holds a position at Nu Holdings, Brazil’s leading fintech company that already offers Bitcoin payments.
Apart from this information, this financial disruptor offers a digital banking platform and already serves more than 36% of the adult population of Brazil while it has also expanded to Mexico and Colombia. The strong penetration was achieved through its mobile app, which offers a wide range of financial services. Despite Latin America’s population of 600 million, the region’s banking and credit card penetration rates are among the lowest in the world. As such, NU is in a good position to capture a sizeable chunk of this underserved market.
Ongoing growth has been impressive, as was the case with the most recent quarterly reading for 4Q22. Fueled by expansion of the active Brazilian customer base and product cross-selling, revenue grew 128% year over year to $1.45 billion, while adj. Net income increased dramatically to $113.8 million from $3.2 million in the fourth quarter of 2021. The company closed 2022 with 74.6 million customers, up 38% year over year.
No wonder Buffett likes the name. He currently owns 107,118,784 shares. At current market prices, these are valued at over $508 million.
Meanwhile, Morgan Stanley analyst Jorge Kuri wasn’t shy in laying out the bull case for this LATAM bank disruptor.
“We believe Nubank is well-positioned to build one of the largest and most valuable banking businesses in Latam based on superior technology, world-class customer experience, valuable brand and strong cohort performance and unit economy,” stated Kuri. “The company has several attractive avenues to drive revenue growth, including a rapidly growing customer base, new product launches and cross-sells, new geographies, M&A and potential expansion into new businesses. Favorable demographic trends offer enduring growth opportunities.”
These comments form the basis of Kuri’s Overweight (ie, Buy) stance, while his $10 price target leaves room for a whopping 111% one-year gains. (To see Kuri’s track record, Click here)
Now turning to the rest of the road, other analysts are on the same page. With 5 buys and 1 hold, the word on the street is that NU is a strong buy. Shares are currently trading at $4.75 and have an average price target of $6.92, suggesting a 46% year-on-year gain. (See NU Stock Forecast)
Snowflake Inc. (SNOW)
The second stock we look at, Snowflake, is a data cloud provider that offers a public service that allows organizations to pool resources and take advantage of near-limitless scalability and performance. If we look at Snowflake’s numbers, we find that it has over 7,800 customers (including over $330 million customers) and a $3.7 billion backlog.
When Snowflake clamored to public markets in September 2020, it did so as the largest software IPO of all time, doubling its market cap in its first day of trading. Shares have not been immune to general market conditions, however, and are down 41% over the past 12 months.
However, the company’s fourth-quarter fiscal 2023 results delivered better results for both revenue and earnings. Revenue rose 53.5% year over year to $589.01 million, beating expectations by $13.56 million. Adj. EPS of $0.14 beat guidance of $0.05. In addition, the company approved a $2 billion share repurchase program.
However, investors were disappointed by the outlook, which suggested growth will slow. For 1QF24, the Company expects product revenues to be in the range of $568 million to $573 million, representing a 44% to 45% CAGR. The Street was looking for $582.1 million.
Buffett, who famously follows a “buy and hold forever” strategy, must also have heard the oft-repeated phrase, “Data is the new oil.” He holds 6,125,376 shares of SNOW which are currently valued at $842 million.
Morgan Stanley enters the frame here with 5-star analyst Keith Weiss believing the soft F24 outlook is nothing to worry about.
“While we are disappointed with the slower pace of growth now expected for FY24, we remain confident in the longer-term opportunities that lie ahead for Snowflake and the Company’s competitive position for this opportunity. Throughout FY23, Snowflake made strides in expanding its solutions portfolio with new solutions like Snowpark and Streamlit, targeting its go-to-market to specific industry verticals, and expanding its partner ecosystem — including a notable expansion of its go-to-market partnership with AWS and Simultaneously rapidly growing margins,” Weiss wrote.
Accordingly, Weiss ranks SNOW at an Overweight (ie, Buy), supported by a price target of $215. That should see the stock gain 56% over the next 12 months. (To see Weiss’ track record, Click here)
Elsewhere down the street, the stock gets an additional 20 buy, 5 hold, and 1 sell for a moderate buy consensus rating. Analysts expect shares to climb 34% in the coming year considering the average target is $184.17. (See Snowflake Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.
Source : finance.yahoo.com