There are easier routes to following Warren Buffett’s wisdom than mirroring Berkshire Hathaway‘s equity positions. Warren Buffett would be the first one to tell you to put most of your money into an index fund that mirrors the S&P 500, and Berkshire Hathaway has money in those, too. Or you could buy shares of Berkshire Hathaway.
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Berkshire Hathaway is a holding company, and it has a different mandate than the typical individual investor. Its positions won’t always be the best moves for you. However, it’s still a great place to get investing inspiration. If you have $300 to invest after saving for an emergency and paying off debt, you might want to consider some of Buffett’s picks. Nu Holdings (NYSE: NU), Amazon (NASDAQ: AMZN), and American Express (NYSE: AXP) are three great choices.
1. Nu Holdings: A digital banking superstar
Nu is an all-digital bank based in Brazil but also serving Mexico and Colombia. It consistently reports incredible growth, with higher revenue, new customers, and increasing profit. It added 5.4 million customers in the 2023 third quarter to reach a total of 89.1 million. It now has more than half of the adult population in Brazil as customers, becoming the fifth-largest bank by customer count. It’s making inroads in its other markets, where it still has a small fraction of the opportunity.
Its strategy revolves around hooking customers into a product with low fees and its easy-to-use consumer experience and then upselling and cross-selling more and higher-priced products. This is leading to incredible growth with strong cost efficiency and higher profit. In the 2023 third quarter, revenue increased 53% year over year, and net income rose from $7.8 million last year to $303 million this year. Average revenue per user continues to increase, from $7.80 last year to $10 in this year’s third quarter. Deposits increased 26% from last year while funding costs remained stable, and net interest income and margin expanded to record rates.
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These aren’t unusual results for Nu, and it has expanded its opportunities with its new markets. Nu is an atypical Buffett stock, and it’s an excellent growth stock to buy right now.
2. Amazon: Leading with AI
Amazon has been an incredible stock to own over its lifetime, but it has plenty of gas left in its tank. It’s on to the next phase of its incredible journey, and artificial intelligence (AI) is leading the way.
It recently released an impressive array of generative AI tools for Amazon Web Services (AWS) that make it easy and quick to create codes, marketing campaigns, and more. It has several levels of AI solutions to address varying needs, from customizable developer tools to small business tools like product descriptions based on images.
If it appears to have maxed out on e-commerce, consider that it’s made some important structural changes to the e-commerce business that are making it more efficient, getting more deliveries to shoppers faster and at cheaper costs to Amazon. The faster orders get to their destinations, the more likely customers will continue to make Amazon their preferred e-commerce provider.
Amazon ended 2023 on a high note, with a 14% year-over-year sales increase in the fourth quarter and $10.6 billion in net income, up from $0.3 billion last year. Investors can expect more from Amazon in 2024 and beyond.
3. American Express: More relevant than ever
American Express hasn’t changed its model recently, but it has made some crucial adjustments and investments that have turned it into a real financial powerhouse. One major shift is its target market, which used to be affluent business people. It has successfully pivoted to capture a younger, still affluent market that’s driving growth now and should continue to do so for years. It’s done some recent card “refreshes” to appeal to a new demographic and keep up its reputation for the best credit card perks. It has also expanded its services, offering bank accounts and a full suite of small business solutions.
This brings it into a new, digital age and allows it to compete with younger fintechs. However, it’s still the same American Express, with a fee-based card model and focus on travel and entertainment. Fee income increased 20% from last year in the fourth quarter, and travel and entertainment spending increased 19% year over year vs. 6% for goods and services, getting back to pre-pandemic trends. The combination has made it stronger than ever, resilient, and filled with future opportunity.
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Management is forecasting a 20% rise in revenue this year, with long-term goals of more than that. It expects earnings per share to increase in the mid-teen percentages for the full year, with similar long-term aspirations.
American Express also pays a growing dividend. It’s a solid, stable stock and a Buffett favorite, and it could add value to your portfolio this year and beyond.
