Three Stocks for the Week of April 3rd

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April 2, 2023

Markets wrapped up a volatile month and quarter with a significant divergence among the major indexes. Strength in technology stocks offset weakness in the financial sector, resulting in a 17% quarterly gain and a 4.5% gain in April for the tech-heavy Nasdaq. Meanwhile, the S&P 500 added 7.5% for the quarter and 1.6% for the month, and the Dow was up 0.9% in Q1 but lost a fraction of a percent in April.

Even after a hot start to 2023, some growth stocks are still way too cheap. This week’s first recommendation is a notable tech name with stellar cash flow and growth potential currently presenting an attractive risk-reward proposition.

Meta Platforms Inc. (META)

One notable growth name that got hammered in 2022 is Meta Platforms Inc. The stock currently trades at less than 25x forward earnings. Still, with the most prominent family of apps and 4 billion users worldwide, META’s recovery this year has been swift. The ticker has stacked on 64% YTD.

Despite its recent rally, the social media leader’s stock is still down 46% from its high and looks cheaply valued for long-term investors. Meta’s incredible cash flow and balance sheet also afford it the ability to take chances and invest in things like the metaverse. The company closed out 2022 with $30.8 billion in net cash, cash equivalents, and marketable securities. Further, it generated $42.7 billion in operating income from its family of apps.

Meta trades at under 20 times the expected annual profit and four times expected sales. With a core business that has held up well against intense pressures, underappreciated potential for success in the metaverse, and shares trading at multiples that leave room for significant upside, Meta stock continues to look undervalued.

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StoneCo Ltd. (STNE)

Brazilian digital payments company StoneCo Ltd. (STNE) provides back-office software, loans, and other financial services to small and medium-sized businesses. Last month, a Brazilian central bank survey showed economists expect rate cuts to start in November. Last week, the country’s central bank kept its benchmark rate at 13.75% despite pressure from President Luiz Inácio Lula da Silva’s government to ease borrowing costs. STNE could yield some big gains for investors as interest rates come down in Brazil.

StoneCo’s share price has gotten crushed in the last two years. In 2021, it fell a whopping 79.9%. In 2022, it dropped 44% as growth and tech names languished. The stock is up nearly 12% in 2023 and seems likely to continue its upward trajectory as economic policy eases in Brazil. Despite the recent rally, shares are still cheap at just 14.9 times the amount of free cash flow its operations generated over the past year. STNE has a Hold rating from the pros who cover it and a median target price of $12.33, representing a 32% increase from Wednesday’s closing price.

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Axsome Therapeutics (AXSM)

Axsome Therapeutics has two approved drugs on the market. Sunosi, a dopamine-norepinephrine reuptake inhibitor and the only one of its kind to treat narcolepsy, and Auvelity, a fast-acting oral treatment for depression, also the first of its kind. The latter launched in October and is being evaluated to treat agitation in people with Alzheimer’s disease and to help people quit smoking. for the treatment of central nervous system disorders and two others that it plans to submit for FDA approval this year.

Share price sank more than 10% last month following the release of disappointing fourth-quarter earnings. The company incurred an adjusted loss of $1.28 per share and generated $24.4 million in revenues. Spending was up 227% year over year. But this increase was due to higher commercial activities for Sunosi and Auvelity, including sales force onboarding and marketing spending, which should pay off in the coming quarters.

Other potential tailwinds include Axsome’s two other drugs — AXS-07 for treating migraines and AXS-14 for fibromyalgia — that it plans to submit for FDA approval this year.

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Three Stocks to Watch for the Week of January 23rd

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Editorial Staff

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January 22, 2023

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After a positive start to the year stocks suffered their first negative week of 2023 amid mixed earnings results, big layoff announcements from major tech firms, and recession concerns. The Dow lost 2.7%, and the S&P 500 fell 0.6%. Meanwhile, the technology-focused Nasdaq Composite finished the week with a 0.6% gain.

Last week, the 10-year Treasury yield hit a four-month low of 3.37%, fueling optimism around tech and growth stocks. Meanwhile, as Fed rate hikes appear close to a peak, hopes for an economic soft landing are growing. The Nasdaq composite hit a bear market closing low as recently as Dec. 28. But it is up 6.4% in 2023.

Our first of three weekly stock recommendations is a mega-cap tech name presenting an attractive opportunity as inflation subsides.

As price increases slow, consumers may spend more, boosting some battered consumer discretionary names. Amazon (AMZN) tops our list of stocks to watch this week as its share price has been nearly cut in half this year on higher inflation and rising rates.

Amazon is by far the world’s largest e-commerce company and, in 2021, surpassed Walmart as the world’s largest retailer outside of China. Without a direct competitor in the U.S., the company has experienced rapid growth through its third-party marketplace. The company operates 110 fulfillment centers worldwide, with 110 in the U.S.

Amazon’s business model has built-in advantages like its subscription service, Prime, and streaming platform. The service has more than 200 million subscribers globally and 163.5 million in the U.S. That figure is expected to continue to expand at a steady pace. According to a report by Statista, U.S. Prime members are expected to reach more than 176.5 million by 2025.

The e-commerce market may continue to suffer in the coming months amid recession fears. Nevertheless, the $9 trillion industry is expected to expand at a CAGR of 14.7% for at least the next four years. Considering the online shopping behemoth held five times the market share of its closest rival, Walmart, its 38% leading market share, it will likely gain the most significant advantage from the market’s growth.

The tech sector took a beating in 2022, creating opportunities in some desirable names. Citi and Goldman Sachs recently named the tech titan as one of their top picks for 2023, echoing the sentiment of many of Wall Street’s pros. Of 53 analysts offering recommendations for AMZN, 48 call it a Buy, and 4 call it a Hold. There are no Sell recommendations for the stock. A median price target of $135 represents a 57% upside from Friday’s closing price.

Throughout 2022, established automakers like Ford, GM, and Mercedes unveiled plans for dozens of new electric vehicles. Mass production of most of these vehicles will kick into gear starting in 2023 and 2024. Our first of three stock recommendations for the week is a small cap with extreme growth potential over the next few years on the black of upcoming E.V. production.

By 2029, electric vehicles could account for a third of the North American market and about 26% of vehicles produced worldwide, according to AutoForecast Solutions. Lithium Americas Corp (LAC) is one company hoping to ride the wave of anticipated global E.V. demand. Launched in 2007, the Canada-based firm searches for lithium deposits in the U.S. and Argentina. While the company is still a pre-revenue concern, its pipeline is brimming with potential, including one project set to enter production stages this year.

The company has full ownership of two development-stage operations in Argentina. One of which is approaching initial production, expected to come later this year. The timeline has been disrupted on LAC’s U.S. project –The Thacker Pass, Nevada lithium mine – due to ongoing legal and regulatory discrepancies. However, a U.S. judge said on Thursday she would rule “in the next couple of months” on whether former President Donald Trump erred in 2021 when he approved the company’s right to begin mining the U.S.’s largest-known lithium resource. It seems likely that the case outcome will be positive for LAC, considering Washington’s push to boost domestic production of metals crucial to the green energy transition and wean the country off of Chinese supplies.

The high-growth -potential small-cap has been gaining the attention of the pros on Wall Street. “We believe 2023 could be an eventful year as there could be a number of key announcements on growth projects and Argentina divesture, which could be catalysts for the share price,” explained HSBC analyst Santhosh Seshadri. To this end, Seshadri recently initiated coverage of LAC with a Buy rating, backed by a $36 price target.

Most analysts agree with Seshadri’s thesis. LAC claims a Strong Buy consensus rating, based on 13 Buys vs. 1 Hold and no Sell ratings. At $37, the average price target makes room for 12-month gains of 79%.

With shipping rates down from record levels, it’s unsurprising that many shipping stocks have been whacked hard this year, creating opportunity for investors looking for dividend stocks. According to the International Chamber of Shipping, 90% of global trade passes through the maritime shipping industry. This is a very volatile sector, but it’s essential to the world’s supply chain.

Anyone who has kept tabs on the global supply chain and shipping saga that’s been unfolding since the outbreak of covid is probably familiar with Genco Shipping (GNK). The company owns a fleet of 44 ships it leases for dry bulk transportation of goods like grain, coal, and iron ore. The going rate to rent one of Genco’s ships is no less than $27,000 per day, which provides some solid cash flow that the company uses to reward its shareholders.

Dry bulk shipping rates, along with GNK’s share price, have fallen in recent months. Still, as China recovers from recent lockdowns and seasonal demand is expected to be strong, it’s hard to see the pullback in share price as anything less than an opportunistic bargain. This is a very volatile sector, but it’s essential to the world’s supply chain.

GNK’s share price is up 6% over the past month. Although the company missed consensus EPS and revenue estimates in the third quarter, it remained consistent with its previously outlined value strategy. The company’s prudent cargo coverage in Q2 resulted in significant benchmark freight outperformance in Q3, allowing Genco to pass the savings onto its investors via a 56% quarterly dividend increase on a sequential basis. Over the last four quarters, the company has declared dividends of $2.74 per share, delivering on its commitment to return substantial capital to shareholders. GNK currently pays a 20% dividend yield.

Three Wildly Undervalued Growth Stocks

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Editorial Staff

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March 29, 2023

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These stocks with enormous growth potential are too profoundly discounted to ignore.

The growth stock collapse of 2022 has shifted to a growth stock resurgence in 2023. Cathie Wood’s growth-centric ARK Innovation ETF (ARKK) sank nearly 70% last year. This year it’s up more than 20% and may just be the beginning amid a shifting economic backdrop.

The Federal Reserve has become increasingly dovish in 2023, downshifting all the way back to a 25-basis-point rate hike at its most recent meeting. Recent talk of a pause and potential rate cuts in the future has made way for investors with an appetite for growth stocks with high reward potential.

Even after a hot start to 2023, some growth stocks look way too cheap. We’ve got three recommendations of stocks with stellar growth potential presenting attractive risk-reward propositions at their current prices.

Meta Platforms Inc. (META)

One notable growth name that got hammered in 2022 is Meta Platforms Inc. The stock currently trades at less than 25x forward earnings. Still, with the most prominent family of apps and 4 billion users worldwide, META’s recovery this year has been swift. The ticker has stacked on 64% YTD.

Despite its recent rally, the social media leader’s stock is still down 46% from its high and looks cheaply valued for long-term investors. Meta trades at under 20 times the expected annual profit and four times expected sales. With a core business that has held up well against intense pressures, underappreciated potential for success in the metaverse and shares trading at multiples that leave room for big upside, Meta stock continues to look significantly undervalued.

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Lithium Americas Corp (LAC)

By 2029, electric vehicles could account for a third of the North American market and about 26% of vehicles produced worldwide, according to AutoForecast Solutions. Lithium Americas Corp is one company hoping to ride the wave of anticipated global EV demand. The company has full ownership of two development-stage mining operations in Argentina. One of which is approaching initial production, expected to come later this year.

The high-growth -potential small-cap has been gaining the attention of the pros on Wall Street. “We believe 2023 could be an eventful year as there could be a number of key announcements on growth projects and Argentina divesture, which could be catalysts for the share price,” explained HSBC analyst Santhosh Seshadri. To this end, Seshadri recently initiated coverage of LAC with a Buy rating, backed by a $36 price target.

Most analysts agree with Seshadri’s thesis. LAC claims a Strong Buy consensus rating, based on 13 Buys vs. 1 Hold and no Sell ratings. At $37, the average price target makes room for 12-month gains of 74%.

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AssetMark Financial Holdings (AMK)

Leading asset manager AssetMark Financial continues to grow as it looks to become a full-service wealth management platform. Its recent acquisition of Adhesion Wealth, which provides wealth management technology solutions to investment advisors and asset managers, will expand its offerings. The company has been growing rapidly and has forecast annual EPS growth of 32% during the next five years. It has also seen its valuation come down to a P/E of 22, which is an excellent value for this growth stock.

The stock is up 34% already this year. Even if the market does retreat, AssetMark still expects roughly 10% growth in assets on its platform in 2023 and 20% year-over-year revenue growth. And as we emerge from this volatile market toward the next bull market, the company, a leader in the market, should see continued growth since asset managers thrive in bull markets.

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Dump These Overblown Tech Stocks Before it’s Too Late

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Editorial Staff

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March 17, 2023

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Tech stocks have come roaring back to start 2023. But after the stunning rebound, some tech names have little room to run. In addition to industry-specific concerns, the technology sector faces headwinds from rising interest rates and a central bank that hasn’t finished its fight against inflation. As such, now seems like a good time to lock in gains on certain tech stocks that have rallied sharply to start the year. In particular, these three tech stocks look vulnerable and may see severe downside in the coming weeks.

SoFi Technologies (SOFI)

SOFI has stacked on 50% in 2023, but the rebound may be fleeting. Shares have already started to fall back toward pre-earnings price levels. In the months ahead, if current economic challenges worsen or if further challenges arise regarding student loans, the impact on revenue could place additional pressure on the stock.

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Uber Technologies (UBER)

Uber shares surged higher immediately following its Feb. 8 earnings call. The ride-share giant reported strong numbers, and management provided an upbeat outlook for the current quarter. However, the stock has already given back some of those gains amid recession concerns. UBER’s current valuation may be overly optimistic about subsequent quarterly results. Another big run may not be in store for the ticker anytime soon.

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Bigbear.ai Holdings (BBAI)

In 2023, BBAI stock is up a startling 645%, with shares advancing from penny stock territory to more than $5/share today. But the current hype cycle around consumer AI products isn’t likely to move the needle for Bigbear.Ai’s business, considering that it’s far from a consumer-facing product like ChatGPT. The company has historically struggled to reach profitability from its operations, and the stock’s recent run seems dramatically overblown.

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Three High-Yielding Dividend Stocks for Steady Profits in 2023

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Editorial Staff

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January 25, 2023

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Amid unrelenting inflation and a strong potential for a recession, volatility is widely expected to continue in 2023. A logical move in times like these is dividend stocks, which pay you just to hold them. Dividend-paying companies regularly reward investors directly with a portion of the cash flow. The most desirable dividend stocks have a history of raising payouts over time as the company’s profits grow.

In addition to the potential for capital gains, the stocks covered in this list also offer sizable dividend yields. Moreover, these three companies seem likely to continue increasing their yields moving forward.

Pioneer Natural Resources Company (PXD) has long viewed sustainability as a balance of economic growth, environmental stewardship, and social responsibility. Its emphasis is on developing natural resources in a manner that protects surrounding communities and preserves the environment.

In the wake of the pandemic, when energy prices were, cheap PXD struck an almost perfectly timed agreement to buy fellow Permian Basin producer Parsley Energy for $4.5 billion. If you’re wondering how PXD managed to finance that transaction, the answer lies in the fact that it was an all-stock deal that ensured Pioneer didn’t have a new giant debt load hanging over its head. The fact that Parsley operated primarily in the same region of West Texas, where Pioneer had both expertise and existing staff, has paid off over time.

That deal was a coup for Pioneer shareholders, built on the fact it was large and well-capitalized at a time when stressed and debt-reliant shale plays were looking for a white knight. On top of that acquisition, PXD also boosted its dividend by 25% at the start of the year as further evidence of its strong balance sheet.

Investors can look forward to upcoming tailwinds, including Pioneer’s recently announced partnership with the world’s largest renewable energy producer, NextEraEnergy (NEE), to develop a 140-megawatt wind generation facility on Pioneer-owned land. The project will supply the company’s Permian Basin operations with low-cost, renewable power and is expected to be operational next year.

In the second quarter, revenue was up 22% YOY to $6.09 billion, smashing the consensus estimate of 4.57 billion. The company reported earnings of $7.48 per share, beating consensus expectations of $7.27 per share. So far, in 2022, the company has rewarded its investors handsomely with $20.73 per share through its generous 10.78% cash dividend. Even after gaining 30% this year, Pioneer shares likely still have valuation upside in addition to their tremendous dividend income potential.

Boston-based, Information management services company Iron Mountain Inc. (IRM) provides information destruction, records management, and data backup and recovery services to more than 220,000 customers in 58 countries. The company has around 1,500 leased warehouse spaces and underground storage facilities worldwide.

As a testament to Iron Mountain’s leadership in its core storage business, the company serves 225,000 customers, including about 95% of the Fortune 1000 companies. As for what the company stores, the wills of Princess Di and Charles Darwin are housed in their facilities, as well as the original recordings of Frank Sinatra and Bill Gates’ Corbis photographic collection.

The need for Iron Mountain’s physical facilities will likely never disappear. Still, as digital storage becomes more widely adopted, the company should continue to grow along with its global data-center business, contributing 8% of adjusted earnings in 2021. It continues to generate over $2 billion per year in revenue from its core storage business while strategically growing its data center portfolio, which is an optimistic sign for steady growth in the coming years.

IRM has maintained a $0.62 per share quarterly dividend since 2019 as it has been focused on steadily recovering its payout ratio from the pandemic. The AFFO came in at $0.93 for the second quarter, a 9.4% year-over-year improvement. The company uses its recurring income to pay an attractive dividend — it currently yields 4.68%. Management’s target for a low to mid 60’s percent dividend payout ratio seems to be quickly approaching, after which they see the dividend increasing.

It should be no surprise that the defense giant Lockheed Martin (LMT) has outperformed the market this year. There are obvious geopolitical implications with the war in Ukraine. When Russia decided to invade its neighbor, both U.S. and European forces rushed in to help Ukraine. It may be some time before LMT stock pops again, as it did at the onset of Russia’s invasion of Ukraine. However, its order books are likely to improve due to rising defense budgets in the U.S. and abroad. Along with Lockheed providing support to Ukrainian resistance fighters, the looming uncertainties in Russia could lead to massive economic problems and gaps in power in former Soviet Union-controlled areas.

Given the recession-proof nature of defense contracting, Lockheed Martin should continue reporting positive results and rewarding shareholders through its quarterly 2.7% forward yield. In other words, even if the market dives again, LMT will likely stand firm. The company runs a P/E ratio of 24 times, below the sector median of 28.3 times. As well, LMT features excellent longer-term growth and profitability metrics.

Three Stocks to Sell Next Week

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Editorial Staff

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January 28, 2023

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Seeking out great stocks to buy is important, but many would say it’s even more essential to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, determining which stocks to trim or eliminate is essential for proper portfolio maintenance.

Even the best gardens need pruning, and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week.

Carvana (CVNA)

Used car prices skyrocketed coming out of the pandemic. However, it looks like the used car market is entering a correction, with some analysts calling for an impending collapse. The Manheim Used Vehicle Value Index showed that used car prices sank 14.9% year-over-year in December 2022, the largest annualized price decline in the 26-year history of that index.

Due to the steep decline in used car prices, Carvana (CVNA) stock has lost 95% of its value over the last 12 months. The company’s profit per vehicle was lower by 25% in 2022. Meanwhile, its total debt stands at $9.25 billion, with only $650 million of cash on hand. There have also been confirmed media reports that the company’s creditors have signed an agreement on handling negotiations with Carvana if it goes bankrupt. That’s not a good sign.

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Opendoor Technologies (OPEN)

Opendoor Technologies (OPEN) aims to revolutionize the home-buying process with its automated solution for a smoother, quicker, and more convenient buying experience. Investors piled into OPEN during its market debut in 2020. However, OPEN stock has lost nearly 80% of its value over the past year, with expectations building that more pain could be on the horizon due to the widespread decline in the real estate market.

Redfin anticipates that there will be a 16% year-over-year decline in the number of existing home sales in 2023, making OPEN an ideal stock to sell.

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Northrup Grumman (NOC)

A senior Ukrainian official recently suggested that Vladimir Putin could be forced out of power within months. If that happens, Moscow would likely have difficulty sustaining the attacks, and the war in Ukraine would probably end.

With Putin seemingly on his way out, aerospace and defense technology company Northrup Grumman (NOC) could be hurt by defense budget cuts. The company has benefitted from supplying its “Bushmaster automatic cannons and midsized ammunition” and its “RQ-4 Global Hawk aircraft” to the Ukrainians. If the war winds down, orders of those products are likely to drop significantly. Northrop also faces margin pressure from cost input inflation and free cash flow pressure from the R&D cash tax input.

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Three Gold Stocks for April 2023

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Editorial Staff

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April 4, 2023

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Gold has long been considered a reliable hedge against inflation and a safe haven for investors during uncertain times. With the recent economic turmoil and global uncertainty, many investors are turning to gold as a means of protecting their wealth. As a result, gold stocks are becoming increasingly attractive to investors looking to capitalize on the precious metal. Today, the price of gold is hovering around the $2,000 per ounce mark, nearing its all-time high of $2,074.88, seen in August 2020.

This recent move in precious metals may have more to run. Thus, investors appear to want exposure to gold in its various forms. We have identified three stocks that are currently attractive and well-positioned to benefit from the current market environment. These companies have shown strong growth potential and are poised to capitalize on the increasing demand for gold.

Newmont Corporation (NEM)

As a leading gold producer with operations in multiple countries worldwide, Newmont has a strong portfolio of assets and a proven track record of success. NEM is up 16% over the past month and will likely sustain solid momentum if the commodities price continues to rise. Gold miners often see increases far in excess of gold. That means that in bull market runs like this for precious metals; investors gain more upside.

Newmont has an investment-grade balance sheet and ended 2022 with a total liquidity buffer of $6.7 billion. Last year, the company delivered free cash flow of $1.1 billion. The stock trades at an attractive forward price-earnings ratio of 22.8 and offers a dividend yield of 3.3% with apparent headroom for healthy dividend growth in 2023. With a focus on operational excellence and sustainability, Newmont is well-positioned to continue generating solid returns for its investors.

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Sandstorm Gold Ltd (SAND)

SAND is a gold royalty company that provides upfront financing to gold mining companies in exchange for a percentage of the future production of gold. The company’s unique business model provides investors with exposure to gold prices without the risks and costs associated with traditional mining operations.

Recent financial results have been impressive, with strong revenue growth and improved margins. Additionally, the company’s balance sheet is solid, with a healthy cash position and no long-term debt. Technically, SAND is showing bullish signals on the charts, with a 19% gain over the past month. The Relative Strength Index (RSI) is also in bullish territory, indicating that the stock has momentum on its side.

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Barrick Gold Corporation (GOLD)

As one of the largest gold mining companies in the world, Barrick has a diverse portfolio of mines located in some of the world’s top gold-producing regions, which helps to mitigate risks associated with any particular location. With a robust portfolio of assets and a track record of successful acquisitions. The company has a strong balance sheet and is focused on delivering value to its shareholders through operational excellence and strategic growth initiatives.

Barrick Gold Corp is up 21% over the past month and may have room to run. Analysts give the stock a Buy rating, and an average price target is $21.74, which represents a 16% upside. Considering the current market environment and the positive signals surrounding GOLD, it seems like a conservative estimate.

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Three Disruptive Names Warren Buffett is Buying

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Editorial Staff

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February 5, 2023

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Warren Buffett is one of the most successful investors on Wall Street. The Berkshire Hathaway CEO is known for a long track record of market-beating returns, evident in the exemplary gains in Berkshire’s Class A shares since 1965. Over the past 57 years, the widely followed Berkshire Hathaway portfolio has generated returns of over 3.64 million percent. In other words, if you had invested $100 in Berkshire in 1965, that investment would be worth more than $3.64 million today. That works out to be an increase of around 20% compound annually, more than twice that of the S&P 500 over the same period. That stellar performance is why investors may want to take a page out of Buffett’s playbook and consider striking up a position in some Berkshire-held potential long-term winners.

The 92-year-old investing legend maintains the same buy-and-hold investment philosophy that has defined much of his success over the past six decades. Historically, the Oracle of Omaha has favored reliable blue chips in industries like healthcare, consumer goods, financials, and energy and tended to avoid unprofitable, speculative, high-growth potential stocks. However, that doesn’t mean there aren’t any growth stocks in Buffett’s collection. In this list, we’ll look at three disruptive, high-growth names Buffett sees as fit for adding to Berkshire Hathaway’s $700 billion portfolio.

It should be no surprise that Buffet owns a significant stake in Apple (AAPL) stock, considering its strong earnings, returns, and management. As the Number 1 stock in Berkshire’s portfolio by market value (worth a whopping $123.66 billion at the end of September), Apple makes up nearly 41% of Berkshire’s total equity portfolio.

In the third quarter of 2022, Buffet added to the firm’s tech investment with a sizeable stake in the world’s largest contract chipmaker Taiwan Semiconductor (TSM). Also known as TSMC, Taiwan Semi is at the top of the list when it comes to the semiconductor manufacturing group. The company makes chips for the likes of AMD (AMD), Nvidia (NVDA), and Qualcomm (QCOM), and it’s a key chip supplier to Apple.

After hitting a two-year low due to a sharp slowdown in global chip demand, TSM’s share price jumped when Berkshire disclosed its more than $4.1 billion position in the stock. Still down more than 40% from its January 2021 peak, anyone on the sidelines might consider now an appropriate time to strike. “Only a small number of companies can amass the capital to deliver semiconductors, which are increasingly central to people’s lives,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, who is bullish on Berkshire Hathaway and TSM.

U.S. investors have been cautious when betting on the Taiwan-based chipmaker as it would lose all Western contracts in the event of a Chinese takeover of the island. However, the company is working to reduce its geopolitical risk with a new $40 billion foundry in Arizona, expected to be operational by 2024. The investment has Washington’s support as it comes amid a U.S. push to boost domestic supplies of semiconductors and Congressional passage of the $52 billion CHIPS and Science Act.

Taiwan Semi reported earnings of $1.79 per share from $20.23 billion in revenue in the third quarter, surpassing consensus expectations of $1.41 EPS from revenue of $19.96. Management reiterated its outlook of Q4 revenue in the range of $19.9 billion to $20.7 billion. Gross profit margin is expected to be between 59.5% and 61.5%. Operating profit margin is expected to be between 49% and 51%.

TSM has a 90% Buy rating from the 38 analysts offering recommendations and zero Sell ratings. Anyone on the sidelines may want to consider striking up a position in this Buffet stock and holding on for years.

At the end of the third quarter, Berkshire also disclosed its position in the leading Brazilian fintech company StoneCo Ltd. (STNE). The firm reported owning close to 10.7 million shares, currently valued at more than $110 million, amounting to a roughly 3.4% stake in the company.

Stoneco provides back-office software, loans, and other financial services to small and medium-sized businesses with a focus on reinvesting the cash it generates to acquire or build new financial products for its customer base. Since early 2019, the company has grown the number of small and medium business clients by 3x, revenue by 2.3x, and net income by 2.2×.

Stoneco has developed a range of payment solutions utilized by e-commerce for businesses and merchants all over Latin America. In the third quarter, the company reported about $390 million in revenue and earnings. Small and medium-sized businesses using the platform surpassed 2.3 million, and total payment volume in the quarter grew to nearly $14 billion.

Stoneco stock is down close to 47% this year on news of rising interest rates, macroeconomic risks in Brazil, and some operational blunders. But base interest rates in Brazil seem to have peaked. A potential decline in the second half of 2023 is expected as Brazil’s inflation normalizes, reducing the margin pressure from rising financial expenses. Meanwhile, StoneCo’s revenue growth should benefit from increasing digitization of payments, higher take rates, and elevated growth in banking and software. STNE stock currently trades at roughly 1.4 times projected forward revenue and 33 times forward earnings, which seems fair for a disruptive, fast-growing company in a developing market.

Buffet isn’t the only institutional investor who’s recently raised an investment in StoneCo. Cathie Wood’s Ark Innovation fintech exchange-traded fund (ARKF) owns roughly 2.55 million shares of the payments company valued at more than $26.5 million. STNE has a Hold rating from the pros who cover it and a median target price of $12.20, representing a 19% increase from Wednesday’s closing price.

Snowflake provides cloud-based ways for companies to better utilize their data over the internet. The company offers cloud-based data storage and analytics, generally termed “data-as-a-service.” Snowflake’s platform offers Data Cloud, an entire ecosystem that enables customers to consolidate and share data. They also provide a tailored version of their Data Cloud, explicitly aimed at the media and advertising industry.

Although Snowflake is a minor constituent of Berkshire Hathaway’s portfolio, the stock has the qualities investors look for in a potentially parabolic stock. The company provides customers with crucial tech infrastructure, and its share price has plunged 65% from its peak last year.

For the third quarter, Snowflake’s revenue surged 67% year over year, driven by the healthy growth in its customer base and increased customer spending. The company reported a 34% year-over-year spike in the total number of customers. Moreover, the number of customers who have spent more than $1 million on Snowflake products over the past year nearly doubled. The company’s pipeline of contracted future revenue that is yet to be realized also shot up 66% year over year to $3 billion. Snowflake should sustain such impressive growth, with addressable market management claims could be worth $248 billion by 2026.

Analysts are expecting 295% annual revenue growth over the next five years. However, investors will have to pay a rich 25 times sales to own shares of SNOW. But that represents a considerable discount from last year’s price-to-sales-ratio of 97. Investors on the hunt for high-growth-potential stocks that the Oracle of Omaha owns may want to give SNOW some thought.

Three Disruptive Names Warren Buffett is Buying

By

Editorial Staff

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December 27, 2022

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