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want to follow in the footsteps of the Oracle of Omaha like the idea of being invested in a business alongside Warren Buffett interested in learning about a Financial stock that Buffett's firm just loaded up on then you have to check out today's video he is a best-selling author 30 year old Jason fever has a plan this guy retired at only 33 years old I don't know if I know too many people that have accomplished something like that he's really kind of a guru when it comes to passive income before I get into today's content if you want exclusive access to my personal six figure stock portfolio and alerts on any new Investments I make check out the patreon link in the description below Warren Buffett is undoubtedly one of the greatest investors to ever live if not the greatest we're talking about compounding money at a 20 annual rate for decades nobody has done it better for longer and that's why he's worth about 110 billion dollars even after giving away billions of dollars to charity already so when Buffett's firm makes moves the rest of us tend to notice now I do not Advocate blindly copying what someone else does we all have different situations goals Etc but it can't hurt to take a look at where some of Buffett's capital is going and whether or not that might make sense for you today I want to tell you about a Financial stock that buckets firm loaded up on during the first quarter of 2023.
let's dig in first let's be clear about what we're talking about Warren Buffett oversees a common stock portfolio worth over 300 billion dollars for his conglomerate Berkshire Hathaway Inc stockticker brk.b Berkshire Hathaway is the company he's controlled as CEO for more than 50 years while Buffett has two lieutenants Todd Combs and Ted weschler assisting him with the portfolio Buffett is still the CIO and main capital allocator by a long shot that said we can never be exactly sure who bought what just something to keep in mind so which Financial stock has Buffett's firm been loading up on it's Capital One Financial Corp stock ticker co-f Berkshire Hathaway opened up a new position in capital the one picking up nine million 922 000 shares this position is worth almost one billion dollars this position was opened during q1 2023 and we know this after Buffett's firm's 13f filing just came out the 13f filing covers all transactions for the prior quarter and it generally gets released 45 days after quarter end the position isn't super large by Berkshire Hathaway standards but one billion dollars is no small chunk of change everything is relative one billion dollars for Berkshire Hathaway is almost a rounding error for them but it would basically be unlimited money for the rest of us still there's value to be had here and while it's certainly possible even likely that Combs or weschler was behind the move buff its own capital is at risk regardless that's because as Berkshire Hathaway goes so goes Buffett he's the largest single shareholder of Berkshire Hathaway no matter who made the Berkshire Hathaway shareholders are impacted all the same let's talk about the business Capital One is a bank holding company that specializes in credit cards auto loans Banking and savings accounts it has a market cap of 36 billion dollars while you might initially think of Capital One as a Commercial Bank it's mostly a credit card issuer when looking at revenue for the most recent quarter q1 2023 the credit card business segment generated seven times more Revenue than the Commercial Banking business segment credit cards classic Warren Buffett why do I say that well American Express Company stock ticker axp is one of the oldest and largest positions in Berkshire Hathaway's common stock portfolio and there is no doubt that Buffett was behind that one American Express is of course a very large credit card issuer Buffett has long loved this business model and why not it's highly lucrative consider this the average credit card interest rate in the US right now is nearly 24 about as high as it's ever been think about that for a second 24 imagine if you could make a 24 annual rate of return on your Investments you'd be a multi-millionaire pretty quickly to put that in perspective it's higher than Buffett's annualized rate of return over his legendary career that number is right about 20 percent now it's not an Apples to Apples comparison also Capital One doesn't make 24 year on everything some balances get paid off before interest is applied some borrowers go into default Etc still it's a fat pitch when it does come down the plate you know what else is a fat pitch here the low valuation this stock is Uber cheap the Stock's stunning thirty percent drop from its 52 week high has created a noticeable amount of cheapness take the priced earnings ratio for example it's six point one single digit p e ratios are always going to catch one's eye but this is an especially eye-catching number it's closer to 5 than 10.
incredible since this is a bank holding company another way to quickly get an idea of the evaluation here is to use the price to book ratio the Stock's own five year average price to book ratio is 0.8 which is pretty low in and of itself yet it's currently 0.6 Capital One is quite frankly priced for dismal business performance but the business hasn't been performing dismally at all Capital One was able to compound its Revenue at an annual rate of 5.3 percent over the last decade earnings per share Sports a compound annual growth rate of 11.2 percent over that time frame pretty solid stuff really not lighting the world on fire or anything like that but relative to the evaluation which is almost seeming to imply there's no growth at all these are impressive numbers huge BuyBacks have definitely helped to Spur some of that excess bottom line growth what do we know about Buffett he loves buybacks all else equal it's an effective way for a shareholder to gain more equity in a business without spending any more of their own Capital this is another box checked for Berkshire Hathaway as Capital One has been a prolific repurchaser of its own shares the company has just been cannibalizing itself the outstanding Share account is down by approximately 34 percent over the last 10 years that is huge of course we invest in where a business is going not where it's been the last 10 years have been great for Capital One and the last few years were supercharged by so much free money sloshing around however the last year or so has unsurprisingly shown a reversal in some of that growth earnings per share for the most recent quarter came in nearly 24 percent lower year over year but while we don't invest in the past we also don't invest for today we're investing for the long term concerning that I don't see Americans using less credit cards five or ten years from now which sets up Capital One for a pretty bright future and you get paid a good sized dividend along the way this is another way in which Capital One is classic Buffett Buffett loves his dividends while Berkshire Hathaway doesn't pay a dividend Buffett himself almost exclusively buys stocks that pay dividends and not just dividends but growing dividends gotta love being able to collect growing dividends but then not pay any of them out yourself sweet deal right Capital one's stock currently offers a 2.7 yield right now which is 100 basis points higher than its own five-year average the payout ratio is only 16.4 percent that's very low and it provides a nice cushion in the face of economic softening unfortunately Capital One has been stingy with the dividend raises the company has gone on long stretches without changing the size of the dividend there just hasn't been the consistent dividend raises that I as a dividend growth investor want to see quite frankly I wouldn't be surprised if Buffett is disappointed with this too as he is pretty much a dividend growth investor himself based on that along with the fact that the position is just under a billion dollars it does lead me to believe that Combs or weschler made this move nonetheless with all of that out of the way the current 60 Cent per share quarterly dividend is twice as high as it was a decade ago a doubled dividend is nothing to sneeze at one thing I don't like about Capital One the unimpressive net charge off rates which tend to be higher than a lot of competing credit card issuers I'll give you numbers here the net charge off rate for April 2023 for Capital One came in at 4.3 percent which rose from 4.2 percent in March this is actually pretty high when you look at all the other Banks and issuers take American Express for example which Berkshire Hathaway is heavily invested in American Express came in with a 1.1 percent rate for April which actually declined from the 1.7 reported in March I'm just not a big fan of the credit quality here should you follow Buffett and his team into Capital One well that's ultimately up to you however there is a lot to like about the business the extremely extremely low valuation comes to mind very quickly which builds in a nice margin of safety in the face of a potential upcoming recession you also get a nice yield and the BuyBacks are incredible however the lack of consistent dividend raises is a black guy for me and I'm leery of the charge off rates but it's hard to deny the appeal of being invested alongside Warren Buffett at the very least it'd be a good idea to take a close look at Capital One here thanks so much for watching hope you enjoyed today's video give us a like we did and let us know in the comments what you think about this Financial stock that Buffett's firm just loaded up on please make sure to subscribe to the channel and ring that notification Bell so you don't miss out on new content also take a look at the description box below for some important links including a link to my personal stock portfolio this six-figure portfolio which I call the fire fund generates enough passive dividend income for me to live off of it allowed me to retire in my early 30s I've been my portfolio entirely accessible over a patreon and I also post alerts there whenever I buy or sell stock I put my money where my mouth is and I'm often invested in the same high quality dividend growth stocks that I make videos on over the years I've heard from thousands of investors who've been profiting from many some exact stocks that I own so if you think this is something that you could benefit from as well check the link in the description to see my portfolio and start getting my buy and sell alerts I'll see you next time thank you
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