3 Buffett Stocks That Are Screaming Buys in May

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It resembles the views of the Federal Reserve lowering interest rates were a bit premature. Inflation is still high and it does not appear that there will be an early expiration date for high interest rates.

Investors, shoppers and others are bracing for what could be an extended stay, and the market's high-flying performance, which reached a record high earlier this year, has stalled. The S&P500 is up an uninspiring 5.5% year to date and investors are waiting for good news on the economy.

Some of that news came via several solid corporate earnings reports. It's earnings season and many companies are reporting strong results despite the uncertainty in the economy. It's a great way to gain insight into the companies that are worth your investment dollars.

Get on Warren Buffett's Choices provides an excellent starting point. Visa (NYSE:V), American Express (NYSE:AXP)And Now Holdings (NYSE: NOW) are three top stocks worth exploring right now.

1. Visa: the eternal winner

Investors often cite Visa's strength as an indicator of the overall economy. When the economy grows, so does Visa, and vice versa. Because the economy is growing more often than not, Visa performs well the vast majority of the time.

That makes sense. Visa is the largest credit card network in the world, with 4.4 billion cards in circulation, more than $15 trillion in twelve-month payment volumes, and partnerships with 14,500 financial institutions. When shoppers make purchases, Visa receives a fee every time one of its cards is hacked.

Despite the current economic volatility, Visa reports strong performance. In the second fiscal quarter of 2024, revenue and net income both increased 10% year over year. It expects this to continue for the rest of the year, suggesting sales will rise in low double digits for both the third quarter and the full year.

But it's more than the simple swipe that makes Visa so attractive. It has built its position through acquisitions and partnerships, helping it maintain its top position. It has developed robust technology and digital capabilities, and while it is the embodiment of the traditional payments network, it is also a competitive fintech leader.

Visa is doing well despite economic uncertainty and will do even better when the economy gets back on track. Now is a good time to buy and take advantage of a potential economic recovery.

2. American Express: the stock with the highest value

American Express is a Visa competitor, but has a different model, which uses a “closed-loop” system. Rather than partnering with financial institutions that underwrite the credit portion of a purchase, American Express acts as its own underwriting bank. It also offers a wide range of financial services for individuals and businesses and has a target audience of affluent customers who pay annual fees for most of its cards.

In its core credit card processing business, American Express's performance reflects the economy. But it has the added benefit of creating a consumer base that has more discretionary income at any given time and is more resilient than the mass buyer when there is pressure. It also has more revenue streams than Visa, which could be one of the reasons why it's one of Buffett's favorite stocks.

Revenue rose 11% year-over-year in the first quarter of 2024, and net income rose 34%. Management targets similar results for full-year revenue growth and earnings per share growth of approximately 15%.

American Express and its shares will benefit from an improved economy in much the same way as Visa. The banking segment will also get a boost if interest rates are reduced.

3. Now: The Incredible Growth Stock

Now Buffett's rare growth stock, showing phenomenal growth since going public in 2021. It is a Brazil-based bank that is fully digital, and its user-friendly interface and low fees have attracted millions of new customers.

The bank's headquarters are in Brazil, where more than half of the adult population is already on the platform. It can also be seen in Mexico and Colombia, where it is just getting started and growth rates are even higher.

Customer accounts increased by 19.3 million year-over-year to 93.9 million in the fourth quarter of 2023. Revenue rose 57% on a currency-neutral basis, and net profit more than quadrupled to $361 million.

The bank grows through new customers, but also applies a strategy for up- and cross-selling to customers with its variety of financial products and services. Average revenue per active customer (ARPAC) continues to increase steadily, from $8.20 to $10.60 annually in the fourth quarter. As these customers use the Nu platform at higher rates, profitability increases.

Now is a young company and has enormous growth potential. Along with new markets, new customers for its core products and increased product acceptance, it is also expanding to target a more affluent customer base. There are numerous opportunities and the bank is working efficiently to utilize them.

The bank reports first-quarter 2024 results on May 14, and the shares could deliver a solid performance. But don't buy Nu stock because of the short-term jump; buy it for its attractive long-term opportunities.

Where you can invest $1,000 now

If our analyst team has a stock tip, it could be worth listening to. The newsletter they have been publishing for twenty years, Motley Fool stock advisorhas more than tripled the market.*

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*Stock Advisor returns April 30, 2024

American Express is an advertising partner of The Ascent, a Motley Fool company. Jennifer Saibil has positions in American Express and Nu Holdings. The Motley Fool has positions in Visa and recommends Visa. The Motley Fool recommends Nu Holdings. The Motley Fool has one disclosure policy.

3 Buffett Stocks That Are Screaming Buys in May was originally published by The Motley Fool

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