People often turn to respected investors like Warren Buffett when looking for advice on stocks. On the surface, following Buffett's moves might make sense since he has a track record of beating the market dating back to the 1960s.
Nonetheless, Buffett's company, Berkshire Hathaway, has grown to a market capitalization of approximately $1 trillion, and enterprises that size can have goals that differ significantly from those of average investors.
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Fortunately, the Berkshire portfolio includes some growth stocks that are likely excellent choices for average investors, even those with a $3,000 budget. Knowing that, they should take a closer look at these three.
1. Amazon
Despite a $2.2 trillion market cap, Amazon(NASDAQ: AMZN) remains well-positioned to drive outsize growth in both technology and retailing.
On the tech side, its Amazon Web Services (AWS) founded the cloud computing industry. And because the cloud is a crucial part of running workloads for artificial intelligence (AI), Amazon has become a prominent AI company as well. With its leadership in these areas, most of its operating income comes from AWS.
However, investors should not write off the e-commerce side of the business. Online sales volumes have slowed, and the company's financials do not break down the profitability of that specific business. Fortunately, its sales platform bolsters its fast-growing subscription, advertising, and third-party seller services.
Those businesses likely help its e-commerce-focused North American and international segments earn an operating profit. Consequently, an improved financial picture led to $39 billion in net income in the first nine months of 2024, amounting to 98% yearly profit growth.
And the stock has become appealing for one surprising reason: valuation. Its price-to-earnings ratio (P/E) of 44 surpasses the S&P 500 averages. But this is low compared to its much higher earnings multiples from past years, making it all the more appealing despite its massive size.
2. Nu Holdings
NuBank parent Nu Holdings(NYSE: NU) is not a household name in the U.S., but the world's largest digital bank outside of Asia continues to make waves in Latin America. In that part of the world, a small number of banking institutions dominated in each country, leaving much of the population without a bank account or credit card.
NuBank has worked to change that situation. In Brazil, nearly 21 million people received their first credit card through NuBank. And 99 million people, or 56% of Brazil's adult population, are now customers.
It has seen early success repeating this formula in Mexico and Colombia, which combined account for 11 million of its customers. In all, the digital bank now serves 110 million customers, 21 million more than in the previous year.
Nu Holdings has pulled back recently on news that Berkshire sold 20% of its stake in the company. However, the fintech stock had tripled over the last two years, and with Buffett's team keeping 80% of its position, the sale does not likely mean a loss of confidence in the company.
Nu's net income for the first nine months of 2024 was $1.4 billion, 112% more than the same period in 2023. Considering that rapid increase, its comparatively low P/E of 38 makes it one that investors should have on their radar.
3. T-Mobile
T-Mobile (NASDAQ: TMUS) continues to be a high performer, especially when compared to its legacy competitors, AT&T and Verizon Communications.
As one of only three nationwide 5G providers in the U.S., it benefits from a competitive advantage from being the only one to begin as a wireless provider. This has helped it avoid most of the legacy costs of its peers, allowing its stock to consistently outperform competitors and the S&P 500.
Admittedly, its performance has begun to resemble that of a mature company. Revenue growth has pulled back to the single digits, and it pays $3.52 per share as an annual dividend, which amounts to a yield of 1.4%.
The telecom has won awards for having the highest 5G availability in the world, and its 127.5 million customer connections are a record high, with 1.6 million of those customers added in just the last quarter.
Thus, for the first three quarters of 2024, net income was $8.4 billion, a 33% increase compared with the same period in 2023. Amid those rising profits, its P/E is 28, up slightly for the year but well under the levels in 2021. All in all, its performance and valuation should position it for further gains as its growth continues.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in Berkshire Hathaway and Nu Holdings. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends Nu Holdings, T-Mobile US, and Verizon Communications. The Motley Fool has a disclosure policy.
