We all have favorite stocks. While the motives may change, there are always a few key attributes to keep in mind.
In this article, I list two of my favorite stocks based on their earnings growth, capital at hand, and positions within their perspective industries.
If you are planning to put away $10,000 in savings, or in other words, money that you wouldn't require for essential spending in the near term, investing that amount in these two stocks could greatly help preserve, or even increase, your wealth even after taking inflation into account.
Cava
Everyone has one; a favorite growth stock that carries a healthy premium in terms of valuation. Cava (CAVA 0.26%) is mine. For one, the food is delicious. The stock is also up 120% over the last five years, and the company is producing double-digit growth in both revenue and earnings.
As evidenced by the performance of Chipotle Mexican Grill (CMG +0.87%), which has gained 245% over the last five years, there's a market for food offerings outside of burgers and fries, and Cava is sitting right at the forefront of what can continue to be a growing market in Mediterranean cuisine (I recommend the steak and feta pita).
In contrast to the stock's one-month performance of a 39% decline, the company finished fiscal 2024 with revenue up 33.1% to $954.3 million. Diluted earnings per share increased 423% year over year to $1.10 per share. I think this pullback is a long-term opportunity, rather than a negative moment for those interested in the stock. Yes, it is expensive, but the market has demonstrated that the right growth stocks offer good opportunities to those who are willing to be patient, and hop in at the right moments.
NYSE: CAVA
Key Data Points
I think the thing that's making investors a bit weary is the increasing share count. Cava drastically increased its outstanding share count from 63.4 million shares in 2023 to 118.27 million at the end of 2024, which put a damper on what could have been even more meaningful earnings for shareholders. Overall, I think the subsequent pullback in the stock makes an opportunity for patient investors.
Adjusted guidance for fiscal 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA) calls for $150 million to $157 million. Conservatively, that would mean an 18.85% increase year over year, and maintain the growth story that has been driving this stock so well. With plans for 62 to 66 new restaurant openings in fiscal 2025, things are hardly over for Cava, which opened 58 new stores in 2024. Operating in 25 states, there's still plenty of room to go for this Mediterranean cuisine company.
Berkshire Hathaway
It's hard to turn away from this stalwart hero of the market. Berkshire Hathaway (BRK.B +2.53%) (BRK.A +2.74%) has produced gains of 142% over the last five years, versus S&P 500 gains of 101%. This might not be one of the top-producing equities compared to things like Nvidia, but it offers a more meaningful cash position that has the ability to maneuver into varying parts of the market.
Anyone who looks at this from a relatively near-minded perspective is going to miss out on the potential of Berkshire Hathaway shares. Some might point to the age of legendary investor Warren Buffett, but I think that's a bit shortsighted. Buffett has worked to ensure a legacy after he is no longer in charge of the company, and I think investors, such as the expected successor, Greg Abel, stand to continue performing well in the market.
NYSE: BRK.B
Key Data Points
The primary catalyst here is the massive cash pile that Berkshire Hathaway has at its disposal. Total cash amounts doubled to $334 billion over the past few quarters, meaning that whoever is in charge of investments at Berkshire has a huge amount of dry powder at their disposal. Furthermore, I would argue, who better to continue an investing tradition of remarkable success than the students of the monumental investor Warren Buffett?
Buffett recently justified the cash increases as the result of an overly picked-through market, leaving less options for investment. This sets him up perfectly to take advantage of any downturns, which is what is starting to happen as a result of President Donald Trump's tariff war.
I think the company has made some smart moves, such as trimming positions in companies such as Apple, which have been growing a bit slower financially than they have in the past. In all, the company did away with $143 billion in stocks, which contributed greatly to the war chest. There are two great takeaways from this move. It's clear that the champion of investing is less than confident in the current market, and that passive investors have a pretty clear buy-in for shares in a company that knows when to buy and sell.
By investing in Berkshire, you're buying into an operator that is amply ready to take advantage of any opportunities in the market in a way that very few other players have a chance at. It's simple. Hundreds of billions of dollars are at this company's disposal. How many can say that they have over $300 billion ready for investment?
At the end of the day, my thesis is simple. This is a company that is well armed to take advantage of future opportunities in a way that very few companies are. Moreover, it's a company of assets. With companies like GEICO, Dairy Queen, Chevron, Duracell, there are genuine assets behind Berkshire's stock.
