It's tax day again, and the focus this tax season is always on refunds. The average refund to taxpayers through early April was $3,011.
This includes both bad and good news for investors. The bad news is that these taxpayers gave interest-free loans to the government. But the sting of that realization may be helped by the good news that taxpayers will likely finally get their money back and have cash to invest.
Where Warren Buffett invests (or at least those who want to find his team's stocks) berkshire hathaway) He might consider some of the consumer stocks he currently owns. Let's take a look at the following two.
Amazon
Amazon (NASDAQ:AMZN) This is a stock that Buffett recognized late. He and his team waited until the first quarter of 2019 to invest, even though the e-commerce giant has been trading since 1997. The selectivity of the company's many businesses and the tremendous growth in its stock price have been a boon to Berkshire's portfolio.
Amazon started as an e-commerce company, and online sales remain its largest source of revenue. But it also supports fast-growing businesses such as subscriptions (Amazon Prime), online seller services, and online advertising. Investors should pay particular attention to the company's cloud computing business. This division, Amazon Web Services (AWS), accounts for the majority of the company's operating profit.
Currently, the company's market value is a whopping $1.9 trillion. In 2023, Amazon announced that its net sales hit a staggering $575 billion, an annual increase of 12%. The rate of increase in operating expenses during this period was slow at 7%, so profits increased significantly. Amazon could earn a net profit of $30 billion in 2023, a significant improvement from the $3 billion loss the year before.
Amazon stock trades at $184 per share, so the average tax refund investor can afford to buy a few shares even if the stock price rises 80%.
From a valuation perspective, Amazon's price-to-earnings (P/E) ratio of 63 may sound expensive, but it's significantly lower than its five-year average of 91. Additionally, the company's Forward P/E ratio of 44 speaks to its price-to-earnings ratio of 45. The retail giant's earnings are expected to grow by %, a pace that could help shareholders maintain above-market ownership levels.
floor and decoration
Regional-to-national growth stories have boosted the following stock prices: home depot And that trend is likely to strengthen a smaller competitor called Home Depot. Floor & Decor Holdings (New York Stock Exchange: FND). Buffett's team began acquiring the company in the third quarter of 2021. The company specializes in hard flooring and decorative products, offering a larger selection than home improvement stores and using its bulk purchasing power to offer lower prices to consumers.
As of the end of 2023, Floor & Decor had expanded to 36 states and had a store count of 221, an increase of 31 stores during the year. The company also plans to open 30 to 35 new stores in fiscal 2024, getting closer to its long-term goal of operating 500 stores.
Certainly, the economic downturn affected short-term results. His net sales for fiscal year 2023 rose 4% to $4.4 billion, well below his double-digit increases in previous years. In addition, higher selling and store operating expenses impacted net income, which was $246 million, an 18% decrease from the previous year.
This has put upward pressure on the P/E ratio, which is currently 49 times. Although this is higher than the average of 40 times over the past five years, it is not an abnormal level for a stock. It also has a price-to-sales (P/S) ratio of 2.7, which is slightly below the average of 2.9, indicating that it is not as expensive as its P/E ratio would suggest.
In fact, despite the company's struggles, its stock price continues to rise. At approximately $110 per share, it is affordable for most income tax refund recipients.
Additionally, there is a “perpetual” demand for hard flooring that attracts Buffett and could drive stock prices higher over time. The stock price should continue to rise as the company expands into further markets by offering additional products to the hard flooring industry.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Will Healy has a position at Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Home Depot. The Motley Fool has a disclosure policy.
2 Warren Buffett Stocks You Can Buy With Your Average $3,011 Tax Refund This Year Originally published by The Motley Fool
