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2 Top Warren Buffett Stocks to Buy Right Now

By Keith Noonan – Jan 5, 2022 at 9:18AM

Key Points

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These Buffett-backed growth stocks could deliver huge wins.

On the day that Warren Buffett completed his majority stake purchase in Berkshire Hathaway (BRK.A -1.05%) (BRK.B -1.36%) in 1965 and became the company's CEO, the stock was priced at about $18 per share. The investment conglomerate looks dramatically different today, and the impact of the Oracle of Omaha's market-crushing guidance is evident with a quick glance at the company's stock price. A single Berkshire Class A share currently trades at more than $435,200, which means that a $1,000 stake in the company at the time when Buffett assumed the reins would now be worth roughly $24.2 million.

While Berkshire Hathaway's massive market capitalization means that delivering that kind of return again is a clear-cut long shot, the company has backed some promising growth stocks that still look capable of delivering stellar gains. Read on for a look at two companies in the Berkshire portfolio that could deliver impressive returns for risk-tolerant investors. 

Warren Buffett.

Image source: Getty Images.

1. Snowflake

With the company sporting an incredibly growth-dependent valuation and concentrating its operations in the highly complex and competitive cloud data services market, Snowflake (SNOW -4.13%) doesn't look like the prototypical Buffett stock. That didn't stop Berkshire Hathaway and its famous CEO from purchasing a substantial stake in the cloud data services company when it had its initial public offering in the latter half of 2020. 

So, why did Buffett buy into Snowflake? Buffett hasn't provided a deep look at the reasoning behind the investment, but there are qualities that suggest that the stock is a good fit for Berkshire and on track for strong performance over the long term. For starters, Berkshire Hathaway's portfolio has become increasingly technology-focused over the last five years, and it looks like Snowflake is poised to take advantage of some powerful long-term growth trends.

The company provides services that make it easy to transfer, combine, and analyze information from otherwise siloed data sources. The ability to access and analyze valuable data will be one of the most important keys to business success in the next century, and Snowflake is set to be a massive winner if it manages to build a lasting moat in its specialized corner of the analytics industry. With its early leadership position in a niche, but increasingly essential category and a notable vote of confidence from Buffett and the Berkshire team, it looks like the company is on track to establish dominance in a service category that will have a big impact on the future. 

2. StoneCo

2021 was a bad year for Brazilian fintech specialist StoneCo (STNE -4.39%). In addition to continued pandemic-related headwinds, high levels of inflation and bouts of political and economic instability combined to dampen the company's performance and radically shift sentiment on business outlooks in the broader region. The unfavorable operating backdrop only seemed to scare more investors out of the stock as 2021 progressed, and the company's share price closed out the year down roughly 80%. 

STNE Chart

STNE data by YCharts

Most people in Brazil and other Latin American countries currently use cash as their standard method of payment, but this looks virtually certain to shift over the long term. As part of this trend, StoneCo stands out as a strong pick-and-shovel play for the growth of e-commerce in the Latin American market. And while near-term economic headwinds in the region are very much at the forefront of investor thinking, the company looks poised to benefit from the long-term rise of the middle class in the region.  

StoneCo has also expanded its service offerings with its recent acquisition of Linx -- a provider of enterprise software services. The combination has the potential to offer companies in Latin American markets a comprehensive software ecosystem that combines workflow tools with payment processing and other fintech features.   

With the company now valued at roughly $5.2 billion, and trading at approximately 27 times this year's expected earnings and 3.9 times expected sales, StoneCo is a growth stock that now trades at value-level prices. Patient investors could score a huge winner with this one. 

Keith Noonan owns Stoneco LTD. The Motley Fool owns and recommends Berkshire Hathaway (B shares), Snowflake Inc., and Stoneco LTD. 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.

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