If you want to know what Berkshire Hathaway CEO Warren Buffett's favorite stock is, you don't have to look hard to find the answer. The investment conglomerate publishes filings after each quarter that break down its equity holdings, and its portfolio weighting allocations make it clear that one company stands above the rest.
Accounting for a staggering 47.5% of Berkshire's equity holdings, Apple (AAPL 2.48%) stock has received a stunning vote of confidence from the Oracle of Omaha. It's not hard to see why the famous investor is so enamored with the tech giant. Thanks to its incredibly successful smartphone business, other successful hardware, and high-margin software-and-services business, Apple frequently ranks as the world's most profitable company, and it has seen incredible stock performance over the last decade.
AAPL Total Return Level data by YCharts
Through a combination of incredible share price gains and dividend payments, Apple has delivered total returns of more than 1,150% over the last 10 years -- and its roughly $2.7 trillion market capitalization makes it the world's largest company.
At such a massive size, delivering 10x returns again within this lifetime could be an impossibly tall order for the tech giant, but there are some much smaller companies in the Berkshire portfolio that have the potential to deliver gains on that level within the next decade -- or sooner. If you're on the hunt for explosive growth opportunities, here's a look at one Buffett-backed stock I think can 10x by 2030.
Down 87%, this company is poised for a comeback
StoneCo (STNE -0.98%) is a Brazil-based fintech company that provides payment-processing services for small- and medium-sized businesses (SMBs). It also has an SMB-oriented lending business and a unit specialized in software for retail and e-commerce business management.
Early in 2021, the company had a market capitalization of more than $28.5 billion, and its stock climbed to $94 per share. Today, the company has a market cap of approximately $4 billion, and its stock trades at about $13 per share.
Why did StoneCo's stock collapse so dramatically? For starters, the company's peak market cap was at the height of a bullish run for smaller, growth-dependent tech companies. The valuation picture changed quickly after that point.
As pressures from the coronavirus pandemic dragged on and inflation started to rise, StoneCo faced a slew of challenges. Fintech businesses were generally hit hard by the macroeconomic headwinds, and the company's credit unit got crushed by the shifting conditions. StoneCo had relied on Brazil's national registry system to assess whether loan applicants were creditworthy, but many of the businesses it loaned to wound up going out of business -- quickly pushing the value of the company's loan book into negative territory.
StoneCo took a big loss on its credit business and temporarily paused lending. But the company is now in the early stages of relaunching the unit, and its core payments business has continued to put up great results. This beaten-down stock has huge rebound potential.
A little-known fintech that can deliver huge returns
StoneCo grew revenue 31% year over year in the first quarter to reach 2.7 billion Brazilian reals -- or approximately $540 million. Meanwhile, non-GAAP (adjusted) net income grew 5.6 times to reach 237 million reals ($47.3 million).
Total payment volume conducted across the company's platform grew 25% compared to the prior-year period and came in more than two times higher than the industry growth rate. StoneCo added 232,000 net new payments customers in the quarter and ended the period with its merchant partner base up 47% year over year. The fintech company is gaining payments market share at an encouraging pace, and its growth could still just be heating up.
It's even possible that the credit business will bounce back and once again become a positive business contributor. After pausing new credit disbursements in 2021 and taking last year to focus on reorienting the business, StoneCo started issuing new loans on a small scale again early in 2023.
STNE PE Ratio (Forward) data by YCharts
Valued at less than 18 times this year's expected earnings and less than 1.7 times expected sales, StoneCo looks downright cheap in the context of its strong sales and earnings growth and long-term expansion potential.
Compared to many other countries, the adoption for card- and app-based payments and e-commerce remains at a much earlier stage in Brazil. But growth in these categories is heating up quickly. With a population of more than 217 million people, the country presents a large addressable market, and StoneCo may have opportunities to expand its services in other Latin American countries.
StoneCo appears to be on track for strong sales and earnings growth through the end of the decade. Provided that macroeconomic conditions improve and fintech stocks broadly regain favor with investors at some point, I think the stock has a shot at delivering 10x returns by 2030.
