The 3 Most Undervalued Warren Buffett Stocks to Buy in July 2024

Stocks to buy

Warren Buffett has outperformed the S&P 500 for decades and has made his investors quite happy. Some investors opt to play it safe by investing in index funds, but others want to outperform the S&P 500 and Warren Buffett.

While it’s no easy feat to outperform either of them, it is possible. Investors can start by looking at Warren Buffett’s portfolio in hopes of outperforming him. Every portfolio consists of stocks that perform better than others, and a closer look at any portfolio can highlight the winners. Narrowing down Buffett’s top performing investments and steering clear from less promising picks can lead to impressive long-term returns.

However, you also want to avoid stocks that are overvalued. Some Warren Buffett stocks have performed well in recent years but also have lofty valuations. These are some of the most undervalued stocks in Warren Buffett’s portfolio that can benefit long-term investors.

American Express (AXP)

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American Express (NYSE:AXP) trades at a 19x P/E ratio and offers a 1.19% yield for its investors. Warren Buffett holds onto many credit card stocks, but American Express is the most undervalued pick of the bunch. It’s also been outperforming the S&P 500. Shares are up by 25% year-to-date and have jumped by 88% over the past five years.

Rising revenue and profit margins point to more gains for long-term investors. American Express reported 11% year-over-year revenue growth and 34% year-over-year net income growth in the first quarter. Those results translated into a 16.9% net profit margin.

The fintech firm is winning over younger generations which should result in elevated revenue and earnings for several years. American Express aims to generate 9% to 11% year-over-year revenue growth and EPS growth in the mid-teens beyond 2026. This Warren Buffett stock has catalysts, a competitive moat, good financials and a reasonable valuation.

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) recently became a $2 trillion company as a 33% year-to-date ascent has brought the stock to new highs. Shares have also more than doubled over the past five years.

The tech giant is a core component of the S&P 500 and the Nasdaq. It’s a Magnificent Seven stock that continues to deliver solid financials. Revenue increased by 13% year-over-year in the first quarter while net income more than tripled year-over-year. Amazon’s online marketplace is generating most of the gains and exhibited double-digit growth rates in domestic and international markets.

Amazon Web Services was also a winner in first quarter results. AWS sales increased by 17% year-over-year to reach $25.0 billion. Artificial intelligence tailwinds should help Amazon report accelerated growth for its cloud platform. Even without AI tailwinds, Amazon is still in a great position. Advertising, groceries and streaming are some of the company’s additional business segments that look promising in the long run.

Nu Holdings (NU)

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Nu Holdings (NYSE:NU) is a promising digital bank located in Brazil. Shares have soared by 58% year-to-date and have plenty of fans in Wall Street. The average price target suggests a 10% upside from current levels, and the stock is rated as a Strong Buy. The highest price target of $15.20 suggests that the stock can gain an additional 19%.

The digital bank continues to report impressive growth number that warrant the recent gains. Nu Holdings added 20.2 million customers year-over-year to reach 99.3 million customers at the end of the first quarter. Net income more than doubled year-over-year, surging from $141.8 million to $378.8 million.

Nu Holdings should continue to exhibit high growth rates as users stay active on the platform. The digital bank offers loans, credit cards, bank accounts, brokerage accounts and other financial products. The company’s suite of financial resources resulted in 69% year-over-year revenue growth and an 83% activity rate among its customers. That means 82.6 million of the company’s 99.3 million customers remain active on the platform.

On this date of publication, Marc Guberti held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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