Born in Omaha, Nebraska, in 1930, Berkshire Hathaway (BRK.A 0.43%) (BRK.B 0.76%) CEO Warren Buffett has lived an incredible life. He's also delivered incredible returns for long-term investors in his company. Since he became the company's leader in 1965, Berkshire's stock has risen from $18 per share to over $542,600 per share -- a performance that would have turned an initial investment of $1,000 into more than $30 million.
With Berkshire sporting a market capitalization of more than $783.5 billion and ranking as the world's ninth-largest company, its stock probably won't deliver that kind of explosive growth again over the next century. But there are still companies held in the investment conglomerate's stock portfolio that are capable of delivering market-crushing returns.
If you're looking for Buffett-backed stocks that could handily outperform the broader market in 2024 and beyond, read on to see why two Motley Fool contributors think these two companies are poised to deliver fantastic performances.
Amazon could put together back-to-back explosive annual returns
Parkev Tatevosian: Despite its phenomenal gains in 2023, Amazon (AMZN +0.63%) could crush the market again in 2024.
The bookseller-turned-everything store is growing into the investments it made during the early stages of the pandemic when people were shopping from home more often. Importantly, since the gains in 2023 have been supported by profit expansion, Amazon's valuation is still not prohibitively expensive.
NASDAQ: AMZN
Key Data Points
In the longer term, Amazon's growth has been nothing short of explosive. From 2015 to 2022, Amazon's sales increased from $107 billion to $514 billion. Most businesses never generate revenue of $407 billion in their entire lifetime; Amazon grew revenue by that much in the above-mentioned years. Amazon likely has much more room for growth as shopping online is much more convenient than shopping in person, and Amazon is the most dominant player in e-commerce.
AMZN PE Ratio (Forward 1y) data by YCharts. PE Ratio = price-to-earnings ratio.
I mentioned Amazon is growing into its investments made during the pandemic. That is demonstrated in Amazon's International and North America segments, which have seen the operating profit margin expand for five consecutive quarters.
Management has noted further room for improvement as it finds opportunities for efficiencies. Wall Street analysts seem to agree, as the consensus estimate is for Amazon to grow earnings per share by 34% in 2024 and 33% in 2025.
Amazon is trading at a forward price to earnings of 44. Given the company's excellent business prospects, it wouldn't surprise me if Amazon stock crushes the market again in 2024.
StoneCo looks poised for an incredible run
Keith Noonan: StoneCo (STNE +0.46%) is a Brazilian fintech company that had its initial public offering (IPO) in 2018 and attracted substantial investment from Berkshire Hathaway. Buffett's investment conglomerate currently owns a roughly 3.4% stake in the company. Rallying 91% in 2023, StoneCo was one of Berkshire's best-performing stocks last year -- and I think it has a good chance of delivering market-crushing performance again in 2024.
NASDAQ: STNE
Key Data Points
Even after a recent surge, StoneCo stock is still down roughly 81% from its high. That's not entirely unwarranted, as the company has only just recently started building its credit business back up after it imploded due to reliance on Brazil's inadequate national registry system and pandemic-related headwinds.
On the other hand, the company's payment-processing business has continued to grow sales and margins at encouraging clips, and the fintech continues to trade at attractive valuation multiples.
STNE PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio. PS Ratio = price-to-sales ratio.
Trading at approximately 20 times expected earnings for 2023 and 2.3 times expected sales, StoneCo stock continues to look like a steal, given the impressive business performance it's been posting lately.
StoneCo added 316,000 net new payments customers in the third quarter, representing a 27.9% increase over net additions in last year's quarter. The company ended its most recently reported quarter with approximately 3.28 million payments customers, up 41.7% over its count at the end of Q3 last year.
Thanks to accelerating momentum for customer growth, the business's sales grew 25% year over year to reach approximately 3.14 billion Brazilian reals in Q3 -- or roughly $647.1 million. Even better, StoneCo has continued to build its customer base at a rapid clip without dramatically ramping up its expenses.
StoneCo's non-GAAP (adjusted) net income margin reached 13.9% in Q3, expanding from 8.7% in the prior-year period. Along with strong sales growth in the quarter, efficiency improvements pushed the company's adjusted net income up 477% to reach 322 million Brazilian reals, roughly $66.4 million based on the exchange rate as of this writing.
Given its incredible business momentum and reasonable valuation multiples, StoneCo looks poised to deliver big wins in 2024 and beyond.
