Want Long-Term Gains? 3 Value Stocks to Build a Buffett-Style Portfolio


  • These three value stocks from Warren Buffett’s portfolio offer long-term growth potential and could help investors craft a Buffett-style portfolio.
  • Diageo (DEO): A global leader in the alcoholic beverages segment, with a diversified portfolio and long-term growth tailwinds.
  • Veritone (VERI): Riding the wave of AI technology, this company provides software for analyzing unorganized data.
  • Nu Holdings (NU): A leading digital banking platform in Latin America with impressive growth and profitability.
value stocks - Want Long-Term Gains? 3 Value Stocks to Build a Buffett-Style Portfolio

Warren Buffett is by far the most well-known investor alive right now. The stocks he buys are looked at significantly more favorably by the market. And typically, each time he adds to a stock, it surges as other investors ride his coattails. That said, when it comes to value stocks, Warren Buffett does not really have a particular knack for such stock types. He’s more of a long-term investor who invests in quality companies at fair prices instead, of the inverse.

That said, this doesn’t mean he doesn’t have solid value stocks in his portfolio. Two of the following stocks on this list are in Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) portfolio, and I believe buying and holding the following three value stocks for the long-run should lead to significant returns in the coming years.

Diageo (DEO)

a line up of black label whiskey to represent DEO stock
Source: IgorGolovniov / Shutterstock.com

Diageo (NYSE:DEO) is a global leader in the alcoholic beverages sector. While the first half of fiscal 2024 was challenging, I see encouraging signs of resilience for the Johnny Walker parent. Excluding Latin America and the Caribbean (LAC), organic net sales still grew 2.5%, despite contending with high single-digit comps.

Management is taking decisive action to rightsize LAC inventory levels by fiscal year-end. Meanwhile, the company’s North America segment is showing sequential improvement due to productivity initiatives. Globally, Diageo unlocked a further $335 million in cost savings, while still investing in its iconic brands.

I’m confident Diageo’s diversified portfolio across categories, price points, and regions position it well to navigate near-term headwinds. The company operates in an attractive sector with long-term growth tailwinds from premiumization and rising emerging market consumption.

I expect Diageo’s top-line growth to reaccelerate, with potential for margin expansion as inflationary pressures moderate.

Value Stocks: Diageo GuruFocus price estimates
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Source: Chart courtesy of GuruFocus.com

Plus, Diageo’s 5% dividend hike and strong $1.5 billion of free cash flow generation make me believe it has Buffett-style compounder potential.

Veritone (VERI)

Robot hand touching fingertips with human hand through a screen. represents ai and machine learning stocks
Source: Shutterstock

This company is not in Buffett’s portfolio, but I think it can be a very good growth play. Veritone (NASDAQ:VERI) is riding the wave of growing interest in artificial intelligence technology, which is projected to become a huge opportunity estimated to amount to a $151 billion market by 2027. The company provides software for analyzing unorganized data. In Q1, Veritone posted $31.6 million in revenue, exceeding the high end of its forecast.

It also reported 7% year-over-year growth in annual recurring subscription revenue, which reached $48.6 million. As more companies seek ways to integrate AI, Veritone is well-positioned to grow.

Management expects Veritone to achieve positive operating margins as early as Q4 2024. I believe that could lead to significant growth from here, considering profitable AI software companies trade at nosebleed valuations.

Veritone EPS growth
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Source: Chart courtesy of GuruFocus.com

Only 5% of businesses are currently using generative AI capabilities right now, but I believe this percentage will rapidly increase over the coming years.

Nu Holdings (NU)

An image of South American currency notes
Source: Shutterstock

Nu Holdings (NYSE:NU) has built a leading digital banking platform that is really taking off across Latin America. Indeed, the company’s growth momentum is truly impressive. Nu recently surpassed 100 million customers faster than any other digital bank outside of Asia. After optimizing their product offerings, the company also saw a re-acceleration of growth in its key Mexico market.

Nu Mexico operating revenue chart
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Source: Chart courtesy of GuruFocus.com

Nu added almost 1.5 million Mexican customers in just the first quarter alone.

This massive user growth in a key market, combined with rising revenue per user, resulted in a remarkable 64% year-over-year surge in total revenue to $2.7 billion. Even more impressively, net income soared 160% to $379 million.

Nu seems perfectly-positioned to benefit from the underbanked population in South America. Many countries in South America seem to be heading in the right direction, like Argentina. Moreover, Brazil (where it mainly operates) has been very aggressive on rate hikes early on and is cutting rates right now, which is boosting fintech companies significantly. As such, I think Nu’s hyper-growth nature and robust profitability makes it an attractive candidate to deliver Buffett-style compounding returns over time.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

Article printed from InvestorPlace Media, https://investorplace.com/2024/06/want-long-term-gains-3-value-stocks-to-build-a-buffett-style-portfolio/.

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