One of Warren Buffett’s most famous investment aphorisms is that it pays to “be fearful when others are greedy and greedy when others are afraid.” With a wide variety of risk factors causing market turmoil recently, the Nasdaq composite index exactly in the correction territory and the S & P500 index that enters and leaves that area, it is fair to say that there is fear in the market.
While more volatile trading may occur in the short term, investing in stocks is arguably the best method people can use for long-term wealth generation, and the Berkshire Hathaway The equity portfolio is a good starting point for investors looking for stocks that offer returns above the market. And this trio of Motley Fool contributors think long-term investors would be smart to buy these Buffett-backed stocks now.
Apple has a great brand, solid profit margins, and a strong competitive advantage
Parkev Tatevosyan: Investors haven’t had many buying opportunities Apple (AAPL 0.65% ) shares declining in recent years. The tech giant has grown to a market cap of over $ 2 trillion and has created many richer shareholders along the way.
One of the most famous of those shareholders is Warren Buffett. Apple is now the largest holding in Berkshire Hathaway’s equity portfolio. And who could blame him for holding that position? Apple’s revenue has increased by over $ 200 billion over the past decade. Even more impressive, its operating income grew from $ 55 billion in 2012 to $ 109 billion in 2021.
Apple achieves excellent performance through innovation. Over and over, it has introduced new products or newer versions of older products that consumers feel they simply should have and are willing to pay premium prices for the privilege. For example, the iPhone has been around for more than a decade now, and in its most recent quarter, which ended December 25, Apple sold a whopping $ 71.6 billion worth of the most recent versions.
Strong customer loyalty is undoubtedly one of Buffet’s favorite traits in an investment, and Apple offers that in abundance. It also generates solid profit margins from serving those customers. Obviously, competitors will try to breach your territory when you have a business with these characteristics, and Apple has shown that it can defend its competitive advantage by offering a number of interesting features that also make its ecosystem sticky, increasing switching costs considerably.
As painful as this stock market correction may be, it has created an opportunity for investors to buy Apple stock at levels 12% below its maximum.
This Buffett Retail Real Estate Bet is for sale
Jason Hall: Ecommerce has certainly changed the retail landscape and online shopping is likely to continue to be a disruptive force. But at the same time, there are many retail businesses in the brick and mortar world that are doing more than just survival, including experiential retailers, fast food and casual fast food operations, and retailers using their store footprints. physicists as important elements in their omnichannel strategies.
Many of these companies, especially those that prefer to run standalone physical locations, don’t really want to own the land or buildings. Real estate is capital-intensive, often requiring a lot of debt, and can make it more difficult to devote resources to their real assets.
log into SHOP Capital (STOR 0.59% ), which has an extensive roster of tenants they work with to find and manage their real estate locations. STORE Capital acquires the properties, then leases them to their tenants under long-term contracts that also include property taxes and building maintenance. This has been a wonderful business for STORE Capital, which has increased its funds from operations by 189% and its dividend by 238% since its IPO.
But stocks fell more than 21% from their all-time high, turning an investment that once beat the market into underperforming.
To paraphrase Buffett, I think it has created an opportunity for investors to get greedy and buy stock in this high yield dividend growth machine while others are afraid.
This downed fintech player has a big advantage
Keith Noonan: Stone Co (STNE 1.80% ) it is one of the worst-performing stocks in Berkshire Hathaway’s portfolio over the past year. Fortunately for Buffett, it’s a relatively small holding for his conglomerate, but the decline in Brazilian fintech valuations has been staggering.
StoneCo shares are down about 90% from their peak in February 2021, and there are good reasons why the market has reassessed the stock. While the United States has seen inflation peak in decades, the situation has been even worse in Brazil and the Latin American country’s economy has suffered prolonged negative impacts from the coronavirus pandemic.
To make matters worse, Brazil implemented new regulatory standards for the credit and credit sectors in response to the challenging macroeconomic environment. This caused substantial losses to StoneCo’s lending business and in response it suspended lending to small and medium-sized businesses.
Last year brought a flurry of bad news for StoneCo shareholders, but it doesn’t appear that the company’s long-term growth engine has been completely derailed. Despite the uncertain outlook for its credit business, its payment processing services for corporate clients continued to see encouraging adoption and growth in total payment volume.
Additionally, StoneCo’s large sell-off means the stock is now trading in territory of value for investors who are willing to tolerate erratic short-term performance waiting for it to realize its potential. Its market capitalization now stands at around $ 2.8 billion and is trading at around 1.8 times this year’s expected sales and 23 times its expected earnings. StoneCo’s short-term earnings prospects have certainly taken a hit, but the tough conditions appear to have created a worthwhile buying opportunity for long-term investors.
This article represents the author’s opinion, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us become smarter, happier, and richer.