We recently compiled a list of the 12 best long-term stocks to buy according to Warren Buffett. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against the other long-term stocks to buy according to Warren Buffett.
Warren Buffett, the most famous investor on Wall Street, needs no introduction, having generated billions of dollars for himself and investors for decades. Throughout his investment career that began in 1965, the ‘Oracle of Omaha’ has averaged annual returns of 19.8%, trumping a gain of 9.9% for the S&P 500 over the same period.
The market-beating performance has propelled Buffett to the top of the charts as one of Wall Street’s most revered and followed investors. His investment portfolio is always tracked as investors scan for potential market opportunities.
READ ALSO: 10 Best Debt-Free Penny Stocks to Buy Now and 10 Best Counter Cyclical and Defensive Stocks to Invest In.
Likewise, Buffett is one of the most successful investors in Wall Street’s history, having accumulated a fortune of $138 billion. His total assets might have been significantly higher if he hadn’t donated large sums to different charitable causes.
Market participants have always applauded his disciplined approach, which entails a long-term perspective. His investment firm has become the latest company to cross the $1 trillion mark on market cap, underlining Buffett’s impressive stock-picking skills. According to Cathy Seifert, Berkshire analyst at CFRA Research, the $1 trillion milestone is a testament to Buffet’s investment firm’s financial strength and franchise value.
Buffett’s investment strategy has remained constant throughout his career, focusing on the concept of value investing. The strategy focuses on identifying companies that are undervalued but have the potential to increase in value over time. Buffett seeks out companies with a lasting edge over competitors, like a well-established brand, high barriers to entry, and a large and loyal customer base, and he buys into them at a price that ensures a safety margin.
Likewise, the billionaire investor is well-known for his cautious stance on investing in high-risk, high-reward sectors like technology. Instead, he prefers to invest in more stable sectors such as retail, insurance, and finance. He is recognized for his commitment to long-term investments, holding onto companies for extended periods, and steering clear of frequent trading. This strategy enables him to benefit from the compound interest effect and allows the companies he invests in to mature and produce significant profits.
Buffett’s cautious approach is evidenced by the fact that his investment firm had over $180 billion in cash as of the end of the first quarter. The cash reserves were expected to swell to over $270 billion as of the end of June.
The cash reserves have been building up as the billionaire investor only invests in finding attractive deals with eye-popping returns. In a 2023 letter to shareholders, Buffett reiterated he did not see the possibility of eye-popping performance.
Buffett has consistently included dividend stocks in his portfolio, which is a strategy that has effectively generated consistent passive income. This year alone, his investments are projected to generate around $6 billion in dividend earnings.
Nevertheless, Buffett has also been in defensive mode in recent months, opting to reduce stakes in some companies. He has trimmed holdings by up to half in some tech giants, concerned by valuations getting out of hand after a year of gains fuelled by the artificial intelligence frenzy.
While valuations have gotten out of hand going by the blockbuster gains over the past year, there are still opportunities to unlock. With the US Federal Reserve poised to end its monetary easing spree with a cut of interest rates, equity is poised to receive a significant boost.
The best long-term stocks to buy, according to Warren Buffett, are companies well poised to benefit from interest rates dropping. Low interest rates make it easier for companies to access cheap capital to accelerate their operations, generating more shareholder value.
Our Methodology
To compile our selection of the best long-term stocks to buy according to Warren Buffett, we began by analyzing Berkshire Hathaway’s 13F portfolio and chose to highlight the stock holdings that have remained within the portfolio for at least 5 years. Next, we assessed the number of hedge fund investors associated with each stock, as of the end of the second quarter of this year. Finally, the stocks were ranked in ascending order based on the value of Warren Buffett stakes in the companies.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a modern payments terminal with a pile of credit cards on the side.
Visa Inc. (NYSE:V)
Warren Buffett’s First Major Purchase: 2011
Berkshire Hathaway’s Latest Investment Stake: $2.18 Billion
Number of Hedge Funds Holding Stakes as of Q2: 163
Visa Inc. (NYSE:V) is a payment technology company that operates a transaction processing network that enables authorization, clearing, and settlement of payment transactions. It is one of the oldest holdings in Buffett’s portfolio, given that the company is a leader in the payment sector. Given that millions and billions of Visa cards are being used worldwide and accepted at over 130 million merchant locations, the company boasts one of the most secured revenue bases.
Visa Inc. (NYSE:V) increasingly benefits from its large scale, as depicted by its solid fiscal Q3 2024 results. Revenue increased 10% year over year to $8.8 billion, while GAAP net earnings reached $4.9 billion or $2.40 per share, showing a rise of 17% and 20%, respectively, compared to the previous year.
The company is expected to deliver better-than-expected results heading into yearend as interest rates drop, therefore boosting consumer purchasing power. It remains one of the best long-term stocks to buy, according to Warren Buffet, as it is staring at a global market opportunity of $20 trillion that should allow it to generate long-term value.
Visa Inc. (NYSE:V) has expanded its tap-to-pay business to replace small cash transactions with credit card payments. It’s also targeting automated clearing house (ACH) payments to replace payments as part of its expansion plan. Amid the tremendous opportunity for growth, the stock trades at a price or earnings multiple of 25 while rewarding investors with a 0.73% yield.
For their second quarter of 2024 shareholdings, 163 out of the 912 hedge funds tracked by Insider Monkey had bought and owned Visa Inc. (NYSE:V)’s shares. Chris Hohn’s TCI Fund Management owned the biggest stake, which was worth $4.41 billion.
Here is what Aoris International Fund said about Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) operates the world’s largest payments network, facilitating the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers…” (Click here to read the full text).
Overall V ranks 9th on our list of the best long-term stocks to buy according to Warren Buffett. While we acknowledge the potential of V as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.