Anticipated Triumphs: The Three Stocks in Warren Buffett's Portfolio Poised for Maximum Gains in 2025
Don't hold your breath waiting for Warren Buffett to unveil which Berkshire Hathaway stocks will shine brightest in 2025's investment landscape. Buffett himself admits that he doesn't possess a crystal ball to predict stock performances over the short term.
However, it's always a fun and engaging tradition to make some predictions at the onset of a new year. So, based on a mix of gut feelings and market insights, here are my picks for the top three Buffett stocks set to rake in the biggest gains in 2025:
1. Nu Holdings
Nu Holdings (NU -0.65%) would have swept the floor in 2024 had the year dragged on a tad longer. This Latin American digital bank sprouted incredible growth, with shares peaking at a whopping 88% rise. Unfortunately, a massive sell-off instigated by Buffett's decision to offload almost 20% of Berkshire's stake in Nu dampened the party mood.
But I've got faith that this setback might just be a blip in Nu's promising trajectory. The stock’s modest valuation of 17.5 times forward earnings is quite appealing, given its potential growth opportunities. Nu's robust financial performance includes a 53% revenue surge and a 24% jump in active users during the third quarter of 2024. Plus, its operational efficiency is on a steady climb as it serves its active customers at a lower cost.
Most of Nu's success story has played out in Brazil, with more than half of its adult population already using its platform. But, as the company's CEO, David Velez, hinted during their Q3 earnings call, Mexico could soon become "another Brazil" for Nu. And Nu is unlikely to slow down its expansion in Colombia, either.
2. Ally Financial
Ally Financial's (ALLY 2.90%) stock may not make it to the winner's podium in 2024, but I'm betting on it to shine brighter in 2025. The financial services giant's auto financing sector faced some turbulent times, with a more rapid-than-expected decline in retail auto business credit conditions.
CEO Michael Rhodes admitted in Ally's Q3 earnings call that the company is grappling with some earnings challenges in the short term. However, he reminded investors that these near-term challenges will pave the way for rejuvenated growth as interest rate cuts kick in.
Ally's sensible valuation of only 8 times forward earnings is hard to ignore. And its low PEG ratio makes it an even more attractive long-term play for forward-thinking investors. The stock's potential rebound could see its share price rise by around 16% based on analyst predictions.
3. Lennar
In contrast to the other two picks, Lennar (LEN 0.07%) isn't exactly boasting impressive growth metrics in 2024. Its share price slumped as investors fretted over potential cuts in interest rate reductions and a missed revenue and earnings forecast in its Q4 results.
But look beyond its temporary turbulence, and you'll discover and incredibly undervalued stock. With its forward earnings multiple of only 9.6, Lennar is considerably cheaper than its competitor, NVR. On top of that, any interest rate cuts could lead to lower mortgage rates, dampening the company's woes and supporting its growth.
What's more, lingering fears over potential tariffs affecting Lennar's bottom line might soon subside, helping the stock climb back up to new heights in 2025.
Enrichment Data:
Nu Holdings Ltd.
Current Growth Prospects:
Nu Holdings Ltd.'s growth prospects have been given a significant boost due to a strategic alliance with a major FinTech company. The partnership aims to accelerate Nu's expansion in the digital banking space. Additionally, Nu is considering relocating its legal base to the UK, which could unlock new opportunities and partnerships.
Ally Financial Inc.
Current Growth Prospects:
Ally Financial reported impressive financial performance in the face of economic headwinds, with its net interest margin indicating potential expansion based on higher loan yields and lower deposit costs.
Lennar Corporation
Current Growth Prospects:
Lennar's growth prospects in 2025 cannot be pinpointed in the provided sources, but hinge on factors like interest rates, consumer confidence, and government policies. The housing market's performance influences Lennar's growth trajectory.
- Regarding financial disclosures, Nu Holdings reported a 53% revenue surge and a 24% increase in active users during the third quarter of 2024, revealing an especially promising financial ratio.
- Warren Buffett's disclosure of Berkshire Hathaway's stake in Ally Financial revealed a moderate valuation of 8 times forward earnings, a PEG ratio that makes it an attractive long-term investment opportunity.
- In 2025, investors looking to invest in sectors unaffected by short-term market fluctuations may want to consider Lennar, with its undervalued stock at a forward earnings multiple of only 9.6, making it significantly cheaper than its competitor, NVR.
- Buffett himself has acknowledged that he doesn't possess a crystal ball to predict stock performances over the short term, but his historically successful investing strategy, especially in the finance sector, may still provide valuable guidance for 2025's investment landscape.
