Nobody in modern history has had an investing career as long and lucrative as Warren Buffett, which makes him someone many investors look up to. His conglomerate, Berkshire Hathaway, has grown into one of the world's largest companies, owning dozens of privately held businesses as well as stakes in an array of public corporations.
The Berkshire Hathaway stock portfolio is a great place to start looking for investment ideas. However, Berkshire has built that portfolio over decades, so it's not as simple as just buying what Buffett already owns.
However, a few Buffett stocks are hanging out at attractive valuations right now, making them potential buys to kick off the new year.
1. American Express
Credit card company American Express (AXP -0.62%) is one of Buffett's most significant and longest-tenured stock holdings. He began buying the stock in the early 1990s, and it became a core holding within a handful of years. Credit cards are a booming business in the U.S., where American Express targets a premium audience of business spenders and high earners.
Its long existence has also built brand power. American Express is widely recognized today, and that's proving out as wealth among Americans transfers from older generations to younger ones. American Express has noted that millennial and Gen Z customers are its fastest-growing demographics. In Q3, spending among these groups grew 18% year over year and represented 60% of new global accounts.
Getting traction with the younger consumers, who are becoming the critical pillars of the economy, could ensure long-term growth for the business. Analysts believe American Express's earning will increase by an average of 14% annually. At the stock's forward P/E of about 15, American Express could be considered a bargain for the brand name and expected future growth.
2. Visa
In the payments-processing industry, Visa (V -0.23%) is another top-tier financial company in the Berkshire Hathaway portfolio. Since the stock accounts for only 0.6% of the portfolio's value, one might say Buffett missed out a bit on Visa's tremendous returns. Since Berkshire first began buying shares in 2011, the stock has returned more than 1,500%, easily outpacing the broader market.
Unlike American Express, Visa doesn't lend money. Instead, it charges merchants fees on each transaction that crosses its payment network. Visa is simply a facilitator of transactions, and as the world's largest payment network (outside of China), and it has flourished as the world shifts away from cash.
Visa has grown into a $530 billion market valuation, and growth on a percentage basis must naturally slow as a company's size increases. But Visa's growth isn't over. Analysts believe the company can generate compound earnings growth of 15% annually. That's a solid deal with the stock trading at 26 times 2023 estimated earnings. Investors may find that Visa still offers some great years of returns.
3. Nu Holdings
Buffett's investments in financial stocks extend into emerging markets, too. Nu Holdings (NU 1.66%), a digital bank that serves Latin America, has fantastic long-term growth opportunities. Berkshire bought the stock shortly after its initial public offering (IPO) in late 2021. It's a low-weight position for the conglomerate, accounting for just 0.2% of the portfolio's value.
Nu Holdings has nearly 90 million customers in Latin America, a region with more than 660 million people. Of those, an estimated 122 million adults don't have bank accounts. Many of those potential customers are up for grabs as the region's economy develops.
Importantly, Nu Holdings is profitable. Based on company forecasts for the completed -- but not yet reported -- Q4, analysts expect to learn that it earned $0.22 per share in 2023. That would give the stock a price-to-earnings ratio (P/E) of 38. Earnings should expand as the company continues growing. Average estimates for 2025 are for EPS of $0.50, giving it a forward P/E of just over 16. Investors willing to hold onto the stock for a few years (or ideally, longer) should see Nu Holdings grow into its valuation and then some. Buffett has proven effective at identifying overlooked market opportunities. Latin America's banking industry could deliver his next win.
