High inflation, rising interest rates, and an uncertain political climate are driving down share prices across the board and fuelling a bear market. With that in mind, here are three stocks that I think fit Warren Buffett’s parameters. I’m buying them as share prices come down.

Amazon

First on my list is e-commerce giant Amazon (NASDAQ:AMZN). The Amazon share price has come down by over 30% since the beginning of the year and I’m using the drop to add to my investment in the company.

Amazon’s declining share price isn’t just the result of general market movements. The company’s most recent earnings report was disappointing – the company announced a loss of $7.56 per share and its stock fell in response.

While I agree that Amazon’s performance in the last quarter was disappointing, I think the market’s response is an overreaction to the company announcing a reduction in the value of its investment in Rivian Automotive. As a result, I see this as a really attractive opportunity to add shares in Amazon to my portfolio. 

StoneCo

I’ve also been buying shares in StoneCo (NASDAQ:STNE) recently. The Brazilian fintech’s stock has also been struggling recently and its shares now trade under $10. Considering Berkshire Hathaway was buying shares at around $31 when the company first became public, I think that the current share price is quite attractive.

Like Amazon, the decline in StoneCo shares isn’t just due to factors affecting the market overall. Higher inflation in Brazil, an over-ambitious investment in Banco Inter, and complications with the company’s loan business have caused the stock to fall over 85% in the last year.

I think that a good amount of the StoneCo’s struggles will subside over time, though. The company’s balance sheet looks strong to me and while I see the risks associated with the stock, I’m happy buying the shares at a greatly depressed price.

Verizon

The last stock that I’m buying at the moment is Verizon Communications (NYSE:VZ). The stock is currently trading on a low price-to-earnings (P/E) multiple of around 9, but I don’t think this tells the full story. 

As a business, Verizon has around $147bn in debt that poses a risk to consider from an investment perspective. That needs to be paid off before returns to shareholders. 

Despite this, I think that the business is attractively priced. Even accounting for the company’s debt, I think that as a Verizon shareholder, I can realistically hope for a return of around 8.56%.

As it is a 5G infrastructure company, I expect demand for Verizon’s services to remain fairly steady for the foreseeable future. Given this, I’m very happy buying shares at the current $48 price.

Summary

Amazon and StoneCo are both companies expecting substantial growth over time. Verizon is more of a solid and steady operation. In the current bear market, I’m happy buying all three.

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Spread the risk

First of all, I’m planning on investing in more than one stock with my remaining allowance. In order to spread my risk out, I’m looking to buy shares in companies with different characteristics. This might involve buying businesses of varying sizes, that are from different sectors, or that are based in different parts of the world. 

In doing so, I’m hoping to protect from my portfolio from macroeconomic headwinds that might affect specific types of businesses. For example, I think that rising interest rates might negatively affect small-cap growth stocks. So I don’t want to put all of my £750 into unprofitable tech companies. But I’m happy to commit some of my capital to a promising business in that sector.

Buy steadily

Second, I intend to spread my buying out between now and 5 April. Rather than trying to invest the full £750 at the very best time, I intend to commit around £35 each day. Since I don’t think that I can identify the best moment before the ISA deadline, my plan is to invest at regular intervals, thereby achieving best average price overall.

Importantly, buying steadily doesn’t mean that I’m going to buy a stock regardless of the price it trades at. My plan to avoid overpaying for an investment is to stick to stocks that I think are trading at a discount to their intrinsic value. This means that even if I purchase shares in a company one day at a slightly higher price than I paid before, I can still be content that the price I’m paying is a good one.

The stocks I’m buying

With this in mind, here are the stocks I’m looking at buying. 

First up is Verizon. I already own shares of Verizon in my portfolio. It’s a large-cap US stock that typically trades at a low price-to-earnings (P/E) multiple.

Second is Howden Joinery Group. This stock is a consumer cyclical based in the UK with a much smaller market cap. I’ve been looking for an opportunity to add shares to my portfolio and I think there’s an opportunity before the ISA deadline. 

Third is StoneCo. As with Verizon, I already own some shares, but I’d like to add more to my portfolio. The company is a payment processing company based in Brazil with a relatively small market cap. The company has had some issues, but I think that those are largely behind it, so there’s an investment opportunity for me here.

My plan is to invest £250 in each stock, buying a little each day before the ISA deadline.

The post How I plan to invest £750 before the ISA deadline appeared first on The Motley Fool UK.

The fall has been the result of problems with StoneCo’s credit operations (described in its Q2 2021 earnings report) and a write-down of the valuation of its investment in Brazilian digital bank Banco Inter (reported in Q3). But the stock is surging today in pre-market trading after the company reported earnings for Q4 last night. 

I own StoneCo shares in my portfolio. The stock is up 24% in pre-market trading, which is a lot, but is nowhere near its former highs. Does this mean that the worst is over?

Q4 Earnings

The market is responding to StoneCo’s earnings report that was released last night. Total revenue increased 87% compared to Q4 2020. Looking forward, management expects Q1 2022 revenue will be between 113% and 119% higher than Q1 2021. 

Payment volumes increased 54% compared to the same period a year ago. The company guided for an increase of between 79% and 83% in Q1 compared to the same quarter of the previous year.

The number of clients using StoneCo’s payment services also increased from 774,000 to 1.77m. In its comments, management predicted that the pace of new additions will decline somewhat in the first quarter of 2022. 

Additionally, the company announced that it had brought forward the purchase of a number of point-of-sale units (those things that you tap your card on to pay for stuff) to avoid being hit by supply problems due to chip shortages. In 2022, the company intends to report its earnings by segment to give investors better visibility into how different parts of the business are performing.

Is StoneCo a buy?

To my mind, the report confirms what I thought before about the company. Over the last year or so, I’ve taken the view that the setbacks that the company has faced have been temporary impediments. That’s not to say that they haven’t had a real impact — they absolutely have — but it is to say that I didn’t think that the problems with the credit operation or the write-down from the Banco Inter deal would have a lasting impact. As a result, I’ve been buying shares since August 2021.

In my view, StoneCo’s troubles last year were teething issues. And these were limited to certain parts of its business. Excluding credit issues, the company’s revenue grew 68% last year. This is why I maintained the view that the stock was a fundamentally sound investment and continued to buy shares. I think that the earnings report from last night goes some way towards vindicating this view. 

Management said last night that lessons have been learned from the difficulties of 2021. The company is playing to win and sometimes being too aggressive can have negative effects. There are clearly risks associated with investing in StoneCo. But I think that the business is on track and I believe that the current share price offers a huge discount to levels that I would be prepared to buy at, even after the likely jump in the share price today. I’m happy to hold and may buy more.

The post Here’s why a Warren Buffett fintech stock is exploding today appeared first on The Motley Fool UK.

Amazon

The first Warren Buffett stock that I would buy now is Amazon (NASDAQ:AMZN). The online retail giant has been a part of Buffett’s investment portfolio since early 2019. The stock has performed poorly over the past year or so but I think that the strength in the underlying business makes this an excellent time for me to add to my existing investment in Amazon.

Amazon shares currently trade at a price-to-earnings (P/E) ratio of around 47. Investing at this level might be risky in an environment where rising interest rates challenge stocks that trade on high multiples of earnings. But I think that Amazon’s strong business performance — underscored by the 40% growth in revenue in its Amazon Web Services segment and the 32% growth in its advertising business  — justifies the current price.

Verizon

Another Warren Buffett stock that I would buy now is Verizon (NYSE:VZ). Berkshire announced its stake in Verizon stock at the start of 2021, after having received permission not to disclose its investment at the end of 2020. The shares currently trade lower than they did when Buffett was buying them. I think that the current price represents an attractive opportunity for me to buy shares that will do well over the next decade.

In many ways, Verizon is the opposite of Amazon. I don’t think that the underlying business is likely to see explosive growth over the next decade, but I believe that the stock’s lower P/E multiple reflects this. The risk here is that its debt level gives it limited financial flexibility. The company’s debt, however, is the result of significant recent investments, so I take the view that it has decent prospects ahead of it without having to look for further opportunities.

StoneCo

Lastly, StoneCo (NASDAQ:STNE) is a Warren Buffett stock that has been catching my eye recently. The Brazilian fintech is down a huge 88% from its highest point and now trades below its IPO price at which Berkshire Hathaway invested in it. I think that now might be a decent time for me to pick up some shares while the company’s shares are out of favour.

I think that the enduring risk comes from the fact that the business does most of its business in Brazil. This means that an investment carries currency risk since StoneCo makes its money in Brazilian reals. It also means that high inflation there might pressure the volumes of payments the company processes. In light of these risks, I wouldn’t have bought the stock at its highs. After an 88% decline, though, I feel better adding to my investment.

Warren Buffett likes to look for strong companies that are available at attractive prices. I think that Amazon, Verizon, and StoneCo fit the bill. As such, I’m buying shares in all three of these for my portfolio.

The post 3 Warren Buffett stocks to buy now and hold for the next decade appeared first on The Motley Fool UK.