Warren Buffett's investment decisions in recent quarters have garnered little positive excitement. His team at Berkshire Hathaway sold more stock than it has bought in the first quarter of 2024, and the growing pile of cash could leave investors wondering whether they should purchase stocks at all.
Indeed, a significant cash position may be a wise move in times like this. But if one wants to put $3,000 of their money or some other figure into stocks Warren Buffett owns, one might want to consider the following two stocks.
Nu Holdings
One Berkshire holding that should attract increasing attention is Nu Holdings (NU -2.20%). The NuBank parent provides digital banking in Brazil, Mexico, and Colombia, and despite serving only three markets, it is the world's largest digital bank outside of Asia.
Admittedly, a Buffett lieutenant may have made this decision, as Buffett was critical of buying IPO stocks in the past. Berkshire also purchased the shares at the height of the 2021 bull market, so the shares lost most of their value before returning to levels near their all-time high more recently.
Despite this poor timing, Nu Holdings is a name that investors should get to know. This company has helped upend finance in its cash-based societies. Its growth numbers are staggering as it makes the financial system accessible to millions of people left out of the traditional banking system.
In Q1, Nu's customer count increased by 5.5 million over the three-month period. It recently topped 100 million total customers, most of which are in Brazil. This count is so high in Brazil that 54% of its adult population holds a NuBank account.
With that level of penetration, it should not surprise investors that for Q1, its $2.7 billion in revenue surged 69% higher yearly. Additionally, its $379 million net income rose by 167% from year-ago levels.
Indeed, the triple-digit growth is unlikely to last as analysts forecast a 68% increase in earnings on a consensus basis.
Still, despite that rapid increase, Nu's price-to-earnings (P/E) ratio stands at 45, a low level considering the triple-digit rise in profits. Furthermore, its newer markets, Mexico and Brazil, accounted for about 7.5 million of NuBank's customers as of the end of Q1. This early success in new markets probably means the rapid growth can continue for years, and at less than $12 per share, investing in Nu is both low-cost and potentially lucrative for shareholders on a budget.
Chubb
In the first quarter of 2024, one could argue the strongest implicit endorsement by Buffett and his team of any stock was for Chubb Limited (CB -0.25%). Berkshire Hathaway bought more than 25.9 million shares of the property and casualty insurance company, an approximately $6.7 billion investment.
In a sense, the move should not surprise Buffett investors, as the Oracle of Omaha has long invested in the insurance industry. Buffett first owned shares of Geico Insurance in 1951 before Berkshire bought it out decades later. Insurers General Re and National Indemnity are also under the Berkshire umbrella.
Moreover, insurers like Chubb are typically steady businesses with reliable free cash flow. Although that free cash flow can temporarily decrease during a catastrophe, insurers can prepare for such events and set premiums accordingly.
The financials seem to back up the steady increases. In the first quarter of 2024, consolidated net premiums rose 14% yearly to more than $12 billion. That brought the company a net income of more than $2.1 billion, a 13% rise from year-ago levels.
Additionally, Chubb offers a dividend that has increased annually for 31 years. At $3.64 per share annually, the dividend yield of 1.3% closely approximates the S&P 500 average.
Furthermore, it sells at a P/E ratio of 12. While that's not a record low, it is well under the five-year average P/E ratio of 15, likely meaning Buffett and his team have found another bargain.
Ultimately, Chubb is unlikely to become Berkshire's most famous or exciting investment. Also, at around $270 each, small investors will probably not buy many shares.
However, it serves as a low-cost, growing investment in a time when investors like Buffett are net sellers of stock. Hence, this business should keep investors in good stead, regardless of what the future brings.
