Warren Buffett is widely regarded as the greatest stock market investor of all time. So I tend to keep a close eye on his holdings.
Recently, one Buffett-owned stock caught my eye, so I decided to buy a few shares for my ISA.
Interested to learn what stock it was? Read on…
My new Buffett stock
Buffett has made some big bets on individual companies recently. Indeed, today, about 74% of his portfolio is invested in Apple, Bank of America, American Express, Coca-Cola, and Chevron.
But I didn’t invest in any of these companies (I already own Apple stock). Instead, I went for a smaller holding in the investment guru’s portfolio – Snowflake (NYSE: SNOW).
This is a technology company that offers cloud-based data storage and analytics services via a Software-as-a-Service (SaaS) model. Founded in 2012, it helps organisations analyse their data in a cost-effective and resource-efficient way.
Now while Buffett owns 6.1m shares here, it’s a tiny holding for him. At 30 June, the stock represented just 0.3% of his total portfolio.
So I’ve gone with a minuscule holding too. For now, I’ve only bought 17 shares (my average price paid was about $160 per share).
Why I bought
Why have I invested here? Well, I see Snowflake as a great play on the data analytics/cloud computing themes for a start. It’s said that data is the new oil, and this company is at the heart of the data storage and analytics industry.
I’m also impressed with the growth here. When I covered Snowflake in November 2022, it had 250 customers with annual spending of more than $1m. Today, that figure stands at 402 – 61% higher.
It’s worth noting that its customers come from a range of industries and include the likes of London Stock Exchange Group, NatWest, Virgin Media, Mastercard, and the NHS.
Additionally, I like the fact that Brad Gerstner of Altimeter Capital has a large position here (around 50% of his portfolio).
Gerstner is one of the biggest names in the tech investing space. Ultimately, it was his ‘open letter’ to Mark Zuckerberg last year that resulted in Meta’s huge turnaround this year. If Gerstner is bullish here, it’s a good sign, in my view.
Finally, I believe that all the ‘froth’ is out of the stock. A few years ago, there was a lot of hype around Snowflake and it rose up to around $400 (twice).
Today though, it’s a different story. The stock has come right down and I think it has built a solid base from which it can launch a steady move higher.
Bags of potential
I’ll point out that I see Snowflake as a higher-risk, speculative holding. Today, the company isn’t generating a lot of profit, so its valuation is very high (the forward-looking P/E ratio is about 240).
Meanwhile, economic conditions are a risk. Because Snowflake offers a pay-as-you-use model and targets smaller/mid-sized businesses, there is a degree of economic sensitivity here.
A third risk is competition from rivals. Recently, it has come to light that Databricks could be a serious competitor.
However, with a market-cap of just $54bn (small for a US-listed tech stock), I like the overall risk/reward skew.
I’m convinced that this stock has the potential to double, triple, quadruple, or even 10-bag in the long run.
