Visa, Nu, and Chubb all survived Buffett’s pruning of Berkshire’s portfolio.
Warren Buffett, one of the world’s most closely followed investors, has led his conglomerate Berkshire Hathaway (NYSE: BRK.A) (BRK.B -0.82%) to consistently outperform the S&P 500 index over the past several decades. Even a modest $3,000 investment in Berkshire just 10 years ago would be worth nearly $10,000 today.
Many investors also look to Berkshire’s investment portfolio to gain insights into Buffett’s outlook for the broader market. Buffett notably sold some of those stocks over the past year to boost Berkshire’s cash hoard to record levels, but he also didn’t trim a lot of his other holdings. Let’s examine three of those standout stocks — Visa (V -0.53%), Nu Holdings (NU -0.53%), and Chubb Limited (CB -2.03%) — and see why they might each deserve a fresh $3,000 investment today.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Visa
Visa operates the world’s largest payment network for card-based transactions. It doesn’t issue any cards of its own — it only partners with banks and other financial institutions which are responsible for issuing the cards, handling those accounts, and collecting all that debt. Visa, like its main competitor Mastercard (NYSE: MA), only generates revenues by charging businesses “swipe fees” for every payment processed through their networks.
That simple business model exposes Visa and Mastercard to less credit risk than American Express (NYSE: AXP), which issues its own cards and handles its own accounts. But it’s attracted the attention of merchant groups and antitrust regulators which are pressing Visa and Mastercard to reduce or cap their swipe fees. However, Visa will likely overcome those near-term regulatory challenges and continue growing as more consumers stop using cash-based payments. That’s probably why Berkshire started to buy Visa in 2011 and now holds a $2.35 billion stake in the company.
Analysts expect Visa’s earnings to grow 24% in 2024 and rise 12% in 2025. Its stock still looks reasonably valued at 26 times forward earnings, it pays a forward yield of 0.7%, and it’s bought back more than 20% of its shares over the past decade. I believe investors will warm up to this evergreen stock again as the macro environment improves.
2. Nu Holdings
Nu Holdings is the largest online bank in Latin America. It’s based in Brazil, but it also serves customers in Mexico and Colombia. Its online-only approach enabled it to grow at a much faster rate than its regional brick-and-mortar competitors. Berkshire Hathaway invested in Nu’s IPO in 2021 and currently holds a $1.6 billion stake in the company.
Nu’s total number of customers more than tripled from 33.3 million at the end of 2021 to 104.5 million in its latest quarter. But the World Bank estimates that over 70% of Latin America’s population is still unbanked — even though the region’s internet penetration rate exceeded 80% last year. Therefore, Nu could still have plenty of room to expand in that fertile market as it enters more countries, gains new customers, and rolls out more financial services.
Nu already offers banking, lending, credit, and crypto services, and it’s keeping that ecosystem up to date with more AI services for analyzing data, operating customer service chatbots, and strengthening its cybersecurity defenses. That growth trajectory looks sustainable: Its monthly revenue per active customer continues to rise, it’s tightly controlling its customer acquisition costs, and it turned profitable on an adjusted basis in 2021.
Analysts expect Nu’s revenue to grow 40% in 2024 and 28% in 2025, even as its three main regions face tough macro and inflationary headwinds. They also expect its adjusted EPS to soar 68% in 2024 and 48% in 2025. Those are stellar growth rates for a stock that trades at just 25 times forward earnings.
3. Chubb Limited
Chubb is the world’s biggest publicly traded provider of property, supplemental health, and casualty insurance policies. It’s based in Switzerland, but it operates in 54 countries and territories. Chubb has a long history, but the current company was created after ACE Limited acquired the original Chubb Corporation in 2016 and inherited its brand.
Berkshire started to invest in Chubb in the third quarter of 2023, and it now owns a $7.9 billion stake in the insurer. That investment wasn’t too surprising, since Berkshire already owns big insurers like GEICO and Gen Re, and it generated 40% of its operating earnings from its insurance underwriting and investment segments last year. Buffett is a big fan of leading insurance companies because they generate stable profits and cash flows in both bull and bear markets.
Chubb is one of those evergreen insurance companies — its consolidated net premiums rose by double digits over the past three years, its core operating income grew by double digits over the past two years, and it generated enough cash to buy back 13% of its shares over the past seven years. Most of its recent growth was driven by its rising property and casualty (P&C) underwriting, life insurance, and investment income. Analysts expect Chubb’s earnings to grow 8% in 2024 and 9% in 2025. It still looks cheap at 12 times forward earnings, and it pays a decent forward dividend yield of 1.2%.
American Express is an advertising partner of The Ascent, a Motley Fool company. Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Nu Holdings and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
