One easy prediction for 2022: Warren Buffett and his investment vehicle Berkshire Hathaway (BRK.A -0.60%) (BRK.B -0.18%) will be as prominent and influential as ever.
One reason for this prominence and influence is Berkshire's closely followed portfolio of publicly traded companies. This is a massive collection, comprising 45 stocks (as of Sept. 30) and nearly $350 billion in total market cap. Of the companies in the portfolio, two relatively inexpensive stocks strike me as standout investments: Apple (AAPL 1.83%) and Visa (V -0.85%). Let's dig into the reasons why.
Apple, which currently trades at just under $180 per share, is about to head into the stratosphere. It is not far from a $3 trillion market cap, an unprecedented level not only for any tech stock, but for any publicly traded American business in our history.
That's what happens when a company builds a powerful brand, consistently and cleverly establishes new revenue streams, and exploits a thorough understanding of how to sell premium-priced goods to a devoted mass of customers.
As big and established as it is, Apple keeps finding ways to grow at a robust clip. From its fiscal 2019 to 2021 alone, revenue rose by almost 41% (to almost $366 billion), while headline net income nearly doubled to just under $95 billion. That makes for a nice 26% profit margin, by the way.
The tech giant has an increasing number of levers it can pull to keep those numbers heading north. There is its relatively recent foray into chip-making -- stealing ground from the sluggish Intel -- with the very well-received and powerful M1 chip family. With an army of engineers that's second to none, it should also be competitive in the electric vehicle (EV) game with the Apple Car it's rumored to be developing.
Meanwhile, a big upgrade cycle to 5G technology should continue to juice sales of devices like the enduringly popular and ever-trendy iPhone line. And once carriers like Verizon roll out 5G in a meaningful way, we'll spend even more idle time gazing at our phones and tablets, making it increasingly critical for consumers to have the latest and most up-to-date models.
Apple will remain a hot manufacturer of such products while developing potentially big revenue generators that keep the growth engine humming -- and, by extension, keep that share price on the rise to reach even more all-time highs.
Another long-tail and highly profitable business can likely be found in your wallet or purse right now. It's a good bet that you've got a credit or debit card carrying the Visa brand, because these days there are over 1.1 billion -- yes, billion -- such pieces of plastic in circulation across the world.
Visa doesn't actually issue its branded credit and debit cards -- that duty falls to partnering financial institutions. Instead, it operates the complex global web that is its payment system, ensuring that the payments and resulting fees get routed to the right parties quickly and efficiently.
Visa takes on no credit risk of its own, in contrast to so-called "closed-loop" operators like American Express and Discover Financial Services that act as both network operators and issuers. As such, Visa is basically a giant middle-man facilitating transactions across the globe.
And what a middle man! Visa has been clocking net profit margins at around the 50% mark for several years now, most recently posting a 51% figure for its fiscal 2021.
The war on cash is ongoing, but plastic and digital (a segment the company has assertively pushed into, by the way) will continue to be on the winning side.
The more Visa and other card brands are swiped or digitally input, the more the top line grows. In the aforementioned 2021, Visa managed to improve its net revenue by 10% -- not bad for a brand that has been around since before many of us were born.
As we barrel into 2022, Visa will continue to reap the rewards of ever-snowballing eCommerce as a nervous world remains at home to avoid the coronavirus. Once we finally start emerging from our caves on a regular basis, we'll likely spend even more as we go out -- with cards that are, frequently, stamped with Visa's familiar logo.
Numerous economists and analysts are predicting boom times once our current plague fades away. No prizes for guessing which monster payment card processor will stand to gain most handsomely from that situation.