As the second half of 2024 unfolds, the stock market continues to offer various investment opportunities ranging from large to small-cap equities.
Indeed, when looking for an investment strategy, borrowing insights from Warren Buffett could be a good option, considering his success with Berkshire Hathaway (NYSE: BRK.A). One option to consider from Buffett is his stake in small-cap equities.
Notably, two small-cap stocks in his extensive portfolio are potential winners: DaVita Inc. (NYSE: DVA) and Floor & Decor Holdings (NYSE: FND). These companies have Buffett’s backing and exhibit characteristics that make them prime candidates for significant growth by 2025, potentially turning a modest investment of $100 into $1000.
Picks for you
DaVita (NYSE: DVA)
DaVita, a leading provider of kidney care services, specializes in dialysis, addressing the growing global prevalence of chronic kidney disease. As the demand for dialysis services rises, DaVita’s market position strengthens.
Berkshire Hathaway holds 36.1 million shares of DaVita, representing 40.33% of the company’s outstanding stock.
The company’s market cap is $12.05 billion, and its stock price was $137 as of the close of markets on July 26, 2024. Notably, in 2024, the stock has rallied over 28% on a year-to-date (YTD) basis.
Additionally, DaVita’s consistent financial health and strategic expansions into new markets support its growth trajectory. For instance, in the first quarter of 2024, the firm recorded revenue of $3.071 billion, surpassing the estimated $3.028 billion. The net income stood at $240 million, exceeding the estimated $179 million. Earnings Per Share (EPS) was $2.65, outperforming the expected $1.95.
Overall, with an aging population and increasing rates of diabetes and hypertension, the demand for DaVita’s services is expected to remain strong, ensuring a stable and recurring revenue stream.
Floor & Decor Holdings (NYSE: FND)
Floor & Decor Holdings focuses on hard surface flooring and related accessories, catering to professional contractors and DIY enthusiasts. Its unique warehouse format and extensive product offerings have driven significant consumer interest and sales growth.
The company boasts a market cap of approximately $10.27 billion, and by press time, the stock was trading at $96. Notably, FND is attempting to recover short-term after trading in the red zone YTD, with losses of about 13%.
Overall, Floor & Decor has capitalized on the housing market and the increasing trend of home renovations. Its aggressive expansion strategy, including opening new stores across the U.S., has enhanced its market reach and growth potential.
The company’s commitment to customer service and a broad product range has built a loyal customer base, further driving its financial performance.
For the upcoming Q2 results, analysts expect Floor & Decor to recover from the year’s first three quarters. The estimated revenue is $1.15 billion, a slight growth from Q1’s $1.1 billion.
Implication of Buffett’s endorsement
Buffett’s investment philosophy focuses on long-term value and growth potential. His stakes in DaVita and Floor & Decor reflect his confidence in their business models and prospects. This endorsement is a strong indicator of potential returns, making these stocks compelling investment options.
Although turning $100 into $1000 by 2025 is an ambitious goal, DaVita. and Floor & Decor offer promising opportunities for significant growth. In conclusion, it remains crucial for investors to conduct thorough research and consider the risks associated with investment in small-cap equities.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
