Warren Buffett's track record of success is undeniable. Since taking over as chief executive officer at Berkshire Hathaway in 1965, Buffett and his team have delivered investors a 19.8% compounded annual return -- double the annual return of the S&P 500 index in the same period.
With the help of investing lieutenants Ted Weschler and Todd Combs, Berkshire Hathaway continues to inspire valuable investment ideas. Three no-brainer Buffett stocks you should consider buying today are Visa (V -0.23%), Citigroup (C 1.41%), and Nu Holdings (NU 1.66%). These stocks bring something unique to your portfolio, and you can have all of them for less than $500. Here's what you need to know first.
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1. Visa dominates the card payment industry
Nobody processes payments at the same scale as Visa. According to data from the Nilson Report, Visa processed $14.1 trillion in total volume across 260 billion transactions in 2022. Its next closest competitors, Mastercard and American Express, processed $8.2 trillion and $1.5 trillion in total volume, respectively.
Visa's dominance didn't happen overnight -- the payment processor built up its merchant and customer base over six decades. As a result, Visa has strong network effects that provide an economic moat around its business.
Another benefit to Visa's business is that it doesn't take on any credit risk. While Visa's network supports debit and credit cards worldwide, it doesn't hold on to credit card debt. Instead, card issuers, such as JPMorgan Chase, Citigroup, or Capital One take on this debt.
Visa's role as an intermediary means it acts as a communication channel between the issuer and merchant bank in exchange for a processing fee on each transaction. As a result, Visa's business model is asset-light, yielding wide profit margins that have averaged a whopping 47% during the past decade.
With the global credit card payment market expected to grow by 8.8% annually during the next decade, Visa's dominant network has it well positioned to capitalize on this growth -- making this Buffett stock an excellent one to buy and hold for the long haul.
2. Citigroup stock is extremely cheap as it undergoes a transformation
Citigroup is the fourth-largest bank in the U.S., but the company has historically underperformed its peers in terms of profitability.
In 2021, Jane Fraser took over as Citi's CEO and made it clear that things would change. Fraser laid out her plans early on: eliminate costly businesses while improving efficiency and profitability by streamlining operations. As part of these plans, Citi would wind down 13 global consumer franchises and reduce its headcount, including removing some layers of management.
What makes the bank appealing is its dirt-cheap valuation. Citi is priced at a 39% discount to tangible book value. In comparison, peers like Bank of America and Wells Fargo trade at a 33% and 32% premium to tangible book value, respectively.
C Price to Tangible Book Value data by YCharts
The bank still has a way to go to improve its profitability metrics as it streamlines operations. Still, its cheap valuation and restructuring could have the stock doubling over the next three years -- making this another solid Buffett stock to buy and hold long-term.
3. Nu Holdings is a fast-growing digital bank with a huge opportunity
Nu Holdings, the parent company of NuBank, is a rapidly growing fintech providing digital banking services to underbanked regions in Latin America. The company began operations in Brazil, where a broken financial system leaves many consumers with little or no access to traditional banking services.
Nu has achieved stellar growth. The bank's total payment volume has grown 282% in the past three years to $29 billion. Not only that, but NuBank serves more than half of Brazil's adult population and now has its sights set on two of Latin America's next largest markets: Mexico and Colombia.
In the past three years, NuBank added 4.3 million customers in Mexico and another 800,000 in Columbia. The bank has done an excellent job bringing online banking to Brazil, and if it has an opportunity to achieve similar success across Latin America. According to some estimates, 70% of Latin America's residents are unbanked or underbanked, providing Nu stock investors with excellent long-term growth potential.
