Please ensure Javascript is enabled for purposes of website accessibility

My Top Warren Buffett Stock to Buy Right Now

By Trevor Jennewine – Updated Aug 22, 2021 at 7:11PM

Key Points

  • Warren Buffett’s Berkshire Hathaway owns $1.4 billion worth of Snowflake stock.
  • Snowflake helps clients unlock value in data, addressing a $90 billion market opportunity.
  • The company's net retention rate exceeds 160%, indicating it offers a sticky product.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Taking tips from successful investors can help you succeed in the long run.

In 1942, Warren Buffett bought his first stock when he was 11 years old, adding three shares of an oil company called Cities Service to his portfolio. That means he's been investing longer than most people have been alive, and since making that first purchase, Buffett has earned a reputation as one of the greatest stock pickers of all time.

With that in mind, he added $735 million in Snowflake (SNOW -2.79%) stock to Berkshire Hathaway's portfolio last year. This move took many investors by surprise as Buffett has historically shied away from young public companies (Snowflake IPO'd in Sept. 2020). But so far, the decision has paid off as Berkshire's stake in Snowflake is now worth over $1.4 billion.

But beyond Buffett's stamp of approval, there are plenty of reasons to like this stock.

Group of investors discussing financial strategies.

Image source: Getty Images.

Snowflake simplifies big data

During the last four years, the average enterprise has seen a 70% jump in the number of applications it uses. This situation is further complicated by the increasing popularity of cloud computing, with the end result being that many organizations generate troves of data across multiple different systems every day.

Snowflake helps these companies integrate, analyze, and unlock value in that data. This allows clients to make more accurate decisions, build data-driven applications, and share data inside and outside of their organization. Moreover, because Snowflake's platform is delivered from the cloud, clients don't have to manage costly and complex infrastructure on site. This accelerates the time to value.

The company also provides tools for governance and security such as encryption, allowing its clients to control access to data according to corporate and regulatory requirements. This makes it possible to share information and collaborate with partners, customers, and suppliers -- all without moving the underlying data.

Currently, management puts the company's market opportunity at $90 billion, but that figure is expected to rise in the years ahead. Suffice it to say, Snowflake has plenty of room to grow its business.

Hands typing on keyboard, overlaid with interconnected data points.

Image source: Getty Images.

Strong financial performance

As this digital transformation has made data more abundant than ever, creating demand for effective data management and analytics solutions, Snowflake's business has grown quickly. Customers across various industries have adopted its data cloud platform.

For instance, financial firms like BlackRock use Snowflake to aggregate and analyze investment portfolios. Restaurants like Chipotle rely on the data cloud to make informed supply chain decisions. And enterprise software tech giants like Adobe use Snowflake to build data-driven marketing applications.

Putting the pieces together, Snowflake has delivered impressive growth in recent years with its customer count quintupling in just two years' time. Of the more than 4,500 customers reported as of the fiscal first quarter, 104 of them generated over $1 million of revenue for Snowflake over the past year. This high-value customer base more than doubled year over year.

Metric

2019

Q1 2022

Customers

948

4,532

Revenue

$96.7 million

$712.1 million*

Data source: Snowflake SEC filings. *For the trailing 12 months ending with Q1 2022.

Snowflake's net revenue retention rate in fiscal 2020 and 2021 was 169% and 168%, respectively. Put another way, the average customer boosted their spending with the company over 60% in each of those years, and management expects that trend to continue through 2022.

That's good for two reasons. First and most obvious, Snowflake's sales rise when its customers spend more. Second, these high retention rates evidence the stickiness of the Snowflake data cloud -- in other words, once a client starts using the platform, they derive so much value from it that they're unlikely to seek out competing services.

The bottom line

Here's the big picture: More enterprises are adopting digital solutions and putting data at the center of their operations. To help with this transformation, Snowflake's platform addresses a range of use cases, from data governance and security to storage and analytics, all of which simplify big data.

More importantly, the company creates tremendous value for its customers, as evidenced by the impressive growth of its customer base and their retention rates. That advantage should help Snowflake capitalize on its $90 billion (and growing) market opportunity in the years ahead, and that's why you should consider adding this Warren Buffett stock to your portfolio.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Snowflake Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

Stocks Mentioned

Snowflake Stock Quote
Snowflake
SNOW
$149.74 (-2.79%) $-4.30
Berkshire Hathaway Stock Quote
Berkshire Hathaway
BRK.A
$477,402.98 (0.07%) $317.98
Berkshire Hathaway Stock Quote
Berkshire Hathaway
BRK.B
$316.15 (0.10%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.