The ultimate goal of investing is to make money. This can improve your future, the future of your family, and perhaps even the future of the world at large. It is to imitate their investment habits and behavior.
Value investors look no further than Warren Buffett for a role model. Berkshire HathawayChairman and CEO of. With his business partner Charlie Munger, Buffett built Berkshire Hathaway into the world’s largest holding company.
That’s why it’s worth considering dozens of stock holdings in the company for your portfolio. Here are two of his best stocks that are poised for double-digit gains in 2023 alone, and you should consider buying and holding them for the long term.
1. Floor & Decor: Big Industry Specialist
Since its founding in Atlanta, Georgia in 2000, floor and decoration (FND -1.92%) has grown into a $7 billion (market capitalization) home improvement retailer in a niche market. How did the company achieve this commendable feat in such a short time?
Aiming to differentiate from other companies with large warehouse-type stores home depot When LowesOur dedication to hard surface flooring allows us to stock nearly 4,100 products in our stores, an unrivaled product offering. We also source our products directly from the manufacturer to significantly reduce costs.
Thanks to these differentiators, the $10,000 investment in Floor & Decor when it went public in April 2017 is now close to $24,000.invest the same amount S&P 500 The index would have returned only $18,000 as the dividend was reinvested. And with 178 warehouse-style stores in the US and his only five design studios, the company has plenty of room for further growth.
Analysts forecast Floor & Decor’s revenue to grow 19.4% annually over the next five years. For context, this is almost three times the home improvement industry average of 6.6%.
With such promising projections, it’s easy to see why Berkshire Hathaway owns a 4.5% stake in a retailer worth about $340 million. The future price-to-earnings ratio (P/E) is trading at 22.1, less expensive than his average future P/E in the home improvement industry of 17.5.
That’s why analysts have set a 12-month price target for floors and decor at $89, up about 25% from the current $71 share price.
2. RH: A Profitable Business Strategy
RHof (RH -0.43%) With a market capitalization of $6 billion, it is positioned as a leading luxury furniture manufacturer. The size and scale of the company attracts the best and brightest designers and craftsmen to its brands, setting it apart from its competitors. This allows RH to appeal to wealthier prospects who are unlikely to be hit hard by a recession.
The company’s luxury products also lead to luxurious margins. RH’s 24% operating margin is well above the industry average of his 16%.
The company’s competitive edge has significantly outperformed the S&P 500 Index over the past decade. A $10,000 investment in RH would have ballooned him to $84,000, and the S&P 500 index would have turned the same amount into $33,000, reinvesting dividends in the meantime.
With plans in place to expand the design gallery to all major markets around the world, RH still has a lot of potential for growth. This should increase the potential for total returns above the market. This explains why Berkshire Hathaway owns his 10% stake in the company, worth $632 million.
RH’s projected P/E ratio of 14.8 is also within reason, given the average multiple for the specialty retail industry of 15.3. This is why the analyst has set his RH 12-month price target at $304. That would represent a 14% increase from the current $267 stock price.
Kody Kester has held positions at Home Depot and Lowe’s Companies. The Motley Fool invests in and recommends Berkshire Hathaway and Home Depot. The Motley Fool U.S. Headquarters recommends Lowe’s Companies and his RH and recommends the following options: The Motley Fool’s U.S. headquarters has a disclosure policy.