Investing in the
equity markets is not easy if you are trying to identify individual stocks for
long-term gains. It is even more difficult if you are eyeing investments in the
highly disruptive technology sector.
Companies such as
Nokia (NYSE: NOK) and
BlackBerry (NYSE: BB) once led
the mobile handset market. However, they failed to innovate and were decimated
once smartphone devices were launched by Apple (AAPL) and
Samsung. If you don’t have the time or expertise to pick individual stocks, you
can either diversify your risk by investing in index funds or follow the
investment advice of stalwarts such as Warren Buffett.
Warren Buffett,
also known as The Oracle of Omaha, has managed to outperform the broader
markets for a few decades now. Here we look at three Warren Buffett owned
companies in the tech space that are well-poised to crush the broader markets
in 2020 and beyond.
A Brazilian fintech company
The first stock on the list is Brazil-based StoneCo (NASDAQ: STNE). Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) owns 14.16 million shares worth $564 million in the company, indicating a 5.1% stake. Similar to most other tech stocks, StoneCo has been volatile in 2020. The stock was trading at a record-high of $46.69 in early 2020 and then slumped below its IPO price of $24 to trade at $17.72 per share. It’s currently trading at $39.84.
StoneCo is a payment processing company that aims to empower merchants and integrated partners to conduct electronic commerce across in-store, online and mobile channels. This payment processing company has multiple growth drivers including the rising purchasing power of Brazil’s middle class, the country’s huge population and its transition towards digital cash.
In the first
quarter, StoneCo’s payment volume rose 42% year-over-year, compared to a 38.3%
increase in sales and a 22.6% jump in net income.
Related: Visa reports a drop in earnings and revenue for Q3
Berkshire Hathaway has a 3% stake in SiriusXM
Berkshire Hathaway owns 132.41 million shares in SiriusXM (NASDAQ: SIRI) worth $754 million, indicating a 3% stake in this audio entertainment company. SiriusXM is a US-based broadcasting company that provides satellite radio and online radio services. It is one of the top players in the audio entertainment space and leading platform for subscription and digital ad-supported audio products.
It acquired
Pandora, in early 2019 for $3.5 billion to gain traction in the high growth
audio streaming space. Pandora is one of the largest ad-supported audio
streaming players in the U.S. and the two platforms reach over 100 million
people per month with their audio products.
According to a Wall Street Journal report, Sirius is looking to acquire Scripps’ podcasting hub – Stitcher for $300 million. SiriusXM also owns a minority stake in SoundCloud after it invested $75 million in the online audio distribution platform.
We can see that
Sirius has made several strategic acquisitions in the digital music vertical,
which will drive its top-line growth in the upcoming quarters.
Related: Visa Inc Q3 2020 Earnings Call Transcript
A $400
billion fintech giant
The last company on this list is Visa (NYSE: V), one of the leading fintech companies in the world, valued at $410 billion in terms of market cap. Berkshire Hathaway owns 10.56 million shares in Visa worth $2.03 billion for a 0.5% stake in the company. Visa has been a massive wealth creator for investors over the last decade.
It has returned over 1,100% since it went public in March 2008 and 170% in the last five years. The payment processing giant continues to benefit from the transition towards digital transactions. The majority of transactions in developing countries are still cash-based, which means Visa’s long-term growth drivers are significant.
Visa has increased
its revenue by 11% in 2019 while adjusted net income and earnings were up 15%
and 18% respectively. Visa has forecast the worldwide payments market at $185 trillion and expects to account for 5.5% of
this market.
The above three Warren Buffett stocks should outperform equity markets in the upcoming decade given their expanding addressable market and focus on top-line growth.
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