Skip to main content

Stoneco Ltd Cl A(STNE-Q)
NASDAQ

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

3 Warren Buffett Stocks You Can Buy With $100 Right Now

Motley Fool - Mon Oct 30, 2023

If you're looking for an investor to emulate, it's hard to pick a better role model than Warren Buffett. Shares of Berkshire Hathaway are up about 3,433,000 since he took control of the holding company in 1965.

You don't need to be rich already to follow Warren Buffett's lead. In fact, there are several stocks in Berkshire Hathaway's equity portfolio you can buy for less than $100 right now.

Individual investors holding up a one hundred dollar bill.

Image source: Getty Images.

StoneCo

StoneCo(NASDAQ: STNE) runs a rapidly growing financial services platform that is increasingly popular among Brazillian business owners. In the first half of 2023, total revenue surged 32% year over year.

Instead of relying entirely on superior technology, StoneCo is building a network of service hubs staffed by real people all over Brazil. This way, if a point-of-sale (POS) system fails in a far-off place, StoneCo's clients can quickly find a real person to help get their business up and running again.

Software that can process transactions is easily replicated, but StoneCo's network of hubs in large cities plus franchises in smaller ones is something its smaller competitors can't match.

A poorly executed lending program splattered StoneCo's bottom line with red ink in 2021. Luckily, the advantage its hub network provides allowed the overall business to recover quickly. The company's adjusted net income margin climbed to a very healthy 10.9% of total revenue in the second quarter.

At recent prices, you can buy StoneCo for just 11.8 times forward-looking earnings expectations. At this low valuation, investors could see a positive return over the long run even if the business stagnates. Given the company's leading position in Brazil's rapidly expanding e-commerce space, outsize returns seem far more likely.

Bank of America

Bank of America(NYSE: BAC) is the second-largest holding in Berkshire Hathaway's equity portfolio. With $3.15 trillion in assets at the end of September, it's also one of the world's largest banks.

No bank is too big to fail, but the odds Bank of America will collapse are minuscule. The company's tier 1 common equity (CET1) ratio was up around 11.9% on Oct. 1, which was about 2.4% higher than the regulatory minimum.

A stock market focused on short-term headaches recently pushed Bank of America shares down to a new 52-week low. At recent prices, the stock offers a juicy 3.8% yield.

Over the past year, the company used less than one-fifth of the free cash flow operations generated to meet its dividend commitment. We can't be sure the stock will stop falling in the near term. That said, investors can reasonably expect the bank to raise its dividend payout further in the years to come.

Ally Financial

Ally Financial(NYSE: ALLY) is an all-digital bank that was once the financial arm of General Motors. Now it's a consumer-focused bank that finished September with about $140 billion in retail deposits, 92% of which are FDIC-insured.

Ally Financial has strong relationships with U.S. car dealerships that sell any brand of vehicles, not just those produced by its former parent. Higher interest rates raised the average originated yield on new loans to an eye-popping 10.7% in the third quarter, but the higher rates aren't affecting demand yet. The company reported a record high of 3.7 million consumer auto applications in the third quarter.

Ally Financial shares have fallen by about one-third from a peak they set in February. At recent prices, the stock offers a hefty 5.1% dividend yield that could rise even higher. The bank needed just 15% of the free cash flow it generated over the past year to meet its dividend obligation.

In the third quarter, Ally Financial's retail auto charge-off rate climbed to 1.85% from 1.05% a year earlier. Investors who buy the stock now will want to keep an eye on this figure. For now, though, the stock looks like a screaming buy.

10 stocks we like better than StoneCo
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and StoneCo wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 23, 2023

Ally is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Cory Renauer has positions in Ally Financial and StoneCo. The Motley Fool has positions in and recommends Bank of America, Berkshire Hathaway, and StoneCo. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.