Warren Buffett knows a thing or two about investing. You can do far worse than leaning on his portfolio of publicly traded investments to find the next potential addition or two for your portfolio. There are dozens of candidates. Let's go over two of the names that I like right now.
Nu Holdings (NU 0.04%) and Sirius XM (SIRI 0.74%) are among the current holdings of Buffett's Berkshire Hathaway stock portfolio. I think they could be screaming buys here, so let's take a closer look at both of them.
1. Nu Holdings
One of Berkshire Hathaway's more unlikely holdings is Nu. Buffett's appetite for financial services typically turns to more traditional platforms, but he owns a piece of the fast-growing Latin American fintech stock. Brazil-based Nu is the parent company of Nubank, a bankless provider of financial services that has taken over its home country in just the last 10 years.
A whopping 54% of Brazil's adult population has a Nubank account. A couple of years ago it expanded into Mexico and Colombia, but Brazil continues to account for the lion's share of its business. Despite the volatile inflationary and geopolitical risks of Latin America, Nu is cranking out the kind of growth that Buffett rarely sees in the credit card companies, investment banks, and conventional banking institutions he also owns.
Nu's latest quarter was another blowout performance. Its customer base widened over the past year by 20% to 99.3 million at the end of March. The allure of its free digital accounts and fee-free credit cards is attractive, but this doesn't mean that this is a beacon for freeloaders. Nubank customers continue to engage with the platform and its growing array of financial services.
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Revenue rose 64% to a record $2.4 billion on a foreign exchange-neutral basis in the first quarter. Yes, the top line is growing more than three times faster than its user base. Many fast-growing fintech upstarts struggle with profitability, but Nu has now been in the black for seven consecutive quarters. The scalability of the business is also on display, as net income and adjusted earnings more than doubled for the period.
Nu trades at 28 times this year's projected earnings and 19 times next year's analyst target. It's not cheap compared to Buffett's more conventional banking plays with bottom-line multiples in the teens or lower. However, Nu's monster growth has served investors well lately. The stock has nearly tripled since the start of last year. Sometimes you have to look south for a stock that will head north.
2. Sirius XM
If you're looking for a more classic screaming buy it's time to turn up the volume on Sirius XM. The country's satellite radio monopoly has seen its shares cut nearly in half this year. It hit a new 11-year low earlier this month.
It's easy to see why Sirius XM isn't a major draw as a revenue growth story. Top-line gains have been slowing for years, culminating in a marginal decline for all of 2023. Revenue growth has turned positive in the last two quarters, but it's basically dancing around zero these days. Why pay for premium in-car radio when a growing number of vehicles make it easy to broadcast streaming apps through through their speakers?
The value here is that Sirius XM is still an active subscription for more than 33 million users. Car manufacturers are still incentivized to push Sirius XM plans over letting drivers just tether their vehicles to their smartphone apps. The business itself is a huge cash generator. Sirius XM has been consistently profitable for years, generating 10-figure free cash flow in the process.
Sirius XM has used the inflow of greenery to aggressively repurchase its shares and pay out a generous dividend. It currently yields 3.8%. It's now trading at just 8 times trailing earnings, cheaper than many of Berkshire Hathaway's more traditional value stocks.
