1 Warren Buffett sees growth stocks fall 80%, plans to buy and hold forever in 2024

berkshire hathaway CEO Warren Buffett is perhaps the most successful investor in modern history. When he bought a controlling interest in the company in 1965, his stock was trading at about $18. Currently, each share of Berkshire’s Class A stock costs about $545,000. If you had his $1,000 position in the company and held the stock when Mr. Buffett took over, your stock would now be worth well over $29 million. Become.

Buffett has built Berkshire’s incredible, world-beating success primarily by investing in U.S.-based businesses and assets. But the Oracle of Omaha has made some notable bets on international stocks, and some of these lesser-known strategies could end up yielding incredible profits. there is.

If you’re interested in a Buffett-backed stock with explosive potential, read on to find out why buying and holding this overlooked stock for the long term looks like a great move right now.

This battered stock could be a big winner

stone co (STNE -1.42%) is a financial technology company based in Brazil. Its core business is providing POS hardware and payment processing services. The company also has a retail management software business and a division that provides credit to small and medium-sized businesses (SMBs), the latter of which is in the early stages of restructuring following a major bankruptcy.

StoneCo held an initial public offering in 2018 at $24 per share and attracted investment from Berkshire Hathaway shortly thereafter. The fintech’s stock price rose above $94 in February 2021, thanks to very strong growth in the company’s payment processing business and encouraging momentum in its credit division.

Unfortunately, shortly after the stock price peaked, the wheels of the company’s credit business began to crumble. StoneCo relied on Brazil’s national registry to assess the creditworthiness of its small business customers, but flaws in the system left the company’s lending arm in trouble. Those headwinds are now in the rearview mirror, and Stoneco looks poised for a breakout.

An overlooked gem in Berkshire’s portfolio

Berkshire currently owns approximately 3.4% of Stone Company stock. This position represents just 0.1% of Buffett’s company’s total stock portfolio.

Stoneco is a very small portfolio holding for Berkshire, but I think it has a good chance of being one of the company’s best-performing stocks over the next five years. Brazil is Latin America’s largest economy and most populous country, and StoneCo is at the forefront of strong financial services trends that drive continued performance momentum.

In the third quarter, the business’s revenue increased 25% year-over-year to BRL 3.1 billion (approximately $638.9 million based on current exchange rates). Non-GAAP (not adjusted in accordance with generally accepted accounting principles) revenue jumped 302% to R$435 million (approximately $89.6 million).

STNE PS Ratio (Forward) Data by YCharts

Trading at less than 21 times this year’s expected earnings and less than 2.4 times expected sales, StoneCo continues to look very cheap given its business momentum.

The company projects adjusted earnings to grow at a compound annual rate of 31% from 2024 to 2027. If the company achieves its goals, I expect investors who buy and hold the stock at today’s prices to reap explosive returns. And while forecasts are somewhat speculative in nature, it’s worth noting that StoneCo has actually significantly outperformed its own forecasts over the past year.

In addition to strong business momentum, StoneCo also has a strong balance sheet. The company has net cash of approximately 4.86 billion Brazilian reals (approximately $1 billion).

StoneCo is valued at $5.7 billion, putting it squarely in mid-cap territory, with plenty of room for long-term growth. Although the company’s stock is still down 80% from its high, investors have a chance to win big with this undervalued Buffett-backed stock.