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1 Warren Buffett Growth Stock Down 80% to Buy in 2024 and Hold Forever

1 Warren Buffett Growth Stock Down 80% to Buy in 2024 and Hold Forever


Berkshire Hathaway CEO Warren Buffett is arguably the most successful investor in modern history. When he bought a majority stake in the company in 1965, the stock was trading at around $18. Today, a single Berkshire Class A share costs about $545,000. If you held a $1,000 position in the company when Buffett took over and held onto your shares, your holdings would now be worth well over $29 million.

Buffett primarily built Berkshire’s incredible global success by investing in U.S.-based companies and assets. But the Oracle of Omaha has made some notable bets on international stocks — and some of these lesser-known stocks could end up generating incredible returns.

If you’re interested in Buffett-backed stocks with explosive potential, read on to find out why buying this overlooked stock and holding it for the long term seems like a great move right now.

This beat down title could be a big winner

PierreCo (NASDAQ:STNE) is a financial technology company based in Brazil. Its core business provides point-of-sale hardware and payment processing services. The company also has a retail management software business and a small and medium enterprise (SME) lending segment, although the latter unit is in the early stages of a restructuring after a major collapse.

StoneCo had its IPO in 2018 at $24 per share and attracted investment from Berkshire Hathaway soon after. Thanks to very strong growth in the company’s payment processing business and encouraging momentum for its credit unit, the fintech’s stock price climbed above $94 in February 2021.

Unfortunately, the company’s credit business began to collapse shortly after the stock’s peak. StoneCo had relied on Brazil’s national registry to assess the creditworthiness of its SME clients, and the system’s shortcomings ultimately undermined the company’s lending unit. Those headwinds are now in the rearview mirror, and it looks like StoneCo might be ready for a breakout.

An overlooked gem in Berkshire’s portfolio

Berkshire currently owns approximately 3.4% of StoneCo. This position represents only 0.1% of the total Buffett Company stock portfolio.

Although StoneCo represents only a very small holding for Berkshire, I think it has a good chance of becoming one of the company’s best performing stocks over the next five years. Brazil is the largest economy and largest country in Latin America by population, and StoneCo is at the forefront of powerful trends in financial services that are expected to result in continued performance momentum.

The company’s revenue increased 25% year over year in the third quarter to 3.1 billion Brazilian reals, or approximately $638.9 million based on the exchange rate current. Non-GAAP (Adjusted and not in accordance with generally accepted accounting principles), revenue jumped 302% to 435 million reais, or about $89.6 million.

1 Warren Buffett Growth Stock Down 80% to Buy in 2024 and Hold Forever

STNE PS Ratio Chart (Forward)

Trading at less than 21 times this year’s expected earnings and less than 2.4 times expected sales, StoneCo continues to look very cheap in the context of the company’s momentum.

From 2024 to 2027, the company projects a compound annual growth rate in adjusted earnings of 31%. If the company succeeds in achieving its goal, I expect investors who take a buy-and-hold approach to the stock at current prices will see explosive returns. And while the projections are somewhat speculative in nature, it’s worth noting that StoneCo has actually significantly outperformed its own estimates over the past year.

In addition to strong commercial momentum, StoneCo also has a solid balance sheet. The company has net cash of approximately 4.86 billion Brazilian reals, or approximately $1 billion.

Valued at $5.7 billion, StoneCo is clearly in mid-cap territory and has enormous room for long-term growth. With the company’s stock price still down 80% from its peak, investors have an opportunity to score big gains with this underappreciated, Buffett-backed stock.

Should you invest $1,000 in StoneCo right now?

Before buying StoneCo stock, consider this:

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Keith Noonan holds positions within StoneCo. The Motley Fool holds positions and recommends Berkshire Hathaway and StoneCo. The Mad Motley has a disclosure policy.

1 Warren Buffett Growth Stock Down 80% to Buy in 2024 and Hold Forever was originally published by The Motley Fool



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