Is Capital One Financial Corporation (COF) Among the Best Warren Buffett Stocks to Buy Right Now?
March 8, 2025
Unlock stock picks and a broker-level newsfeed that powers Wall Street. Upgrade Now
We recently compiled a list of the 10 Best Warren Buffett Stocks to Buy Right Now.In this article, we are going to take a look at where Capital One Financial Corporation (NYSE:COF) stands against the other Warren Buffett Stocks.
Warren Buffett is one of the most successful investors the world has known. Additionally, he is arguably one of the strongest supporters of long-term investing. Buffett uses his hedge fund, Berkshire Hathaway, to invest in solid businesses, and he frequently keeps such stocks for years or even decades.
Warren Buffett wagered $1 million in 2007 that the broader market index fund would outperform a group of hedge funds over ten years. Buffett’s preferred Vanguard Index Fund Admiral Shares produced average yearly returns of 7.1%, despite the 2008 financial crisis, compared to the average of the hedge funds of 2.2%. While hedge funds only reached $121,000 by 2016, a $100,000 investment in Vanguard grew to $185,000. The primary issue was fees, with hedge funds’ 2% management fees and 20% profit share reducing earnings compared to index funds’ 0.03% fees. Buffett’s straightforward approach, supported by inexpensive investing, far outpaced pricey active management.
Warren Buffett made it clear in his 2025 shareholder letter that Berkshire is not abandoning stocks, even though some analysts claim that the company has a record $334 billion in cash that it is reserving. Buffett tells shareholders,
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change.”
Buffett’s longtime belief that equities, which represent ownership in successful companies, are still the best way to build wealth over the long run is reflected in this position. He cautions against turning to cash or bonds, particularly in inflationary times when bond returns lag behind price increases and the currency depreciates.
Buffett’s value investing concepts remain intact even as markets shift. He draws attention to the company’s growing stakes in five significant Japanese trading firms, which represents an exceptional but purposeful venture into international stocks. He mentioned that after reviewing the financial records, they were surprised by how undervalued the stocks appeared. Despite some of these equities declining by as much as 24% over the past year, he regarded these downturns as investment opportunities rather than reasons for concern. He also emphasized that their holdings in these five companies were intended to be long-term investments.
Buffett’s conviction that patient investors will eventually be rewarded by undervalued companies with solid fundamentals is seen in Japanese investments. He commends these businesses for their prudent capital management, shareholder-friendly practices, and fair executive pay. Buffett’s strategy highlights a key idea in value investing: if the underlying company is favorable, short-term price volatility doesn’t matter. Buffett has shown throughout his career that he does not hesitate to look for bargains, even if they are located outside of the United States.
The route to success continues to be apparent for investors who want to follow in Buffett’s footsteps: own up to your mistakes, stick with profitable assets like equities, and patiently invest where value is present despite short-term noise.
A smiling face of a customer as they make a deposit at this company’s branch.
For this article, we scanned Warren Buffett’s Q4 2024 portfolio. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of over 1,000 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s revenue growth (year-over-year) as a tiebreaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Number of Hedge Fund Investors: 89
Capital One Financial Corporation (NYSE:COF) uses its online and mobile channels to attract new clients and manage existing ones while maintaining a smaller branch network than its traditional banking counterparts. The company has been able to expand its national reach beyond what its limited branch network would normally permit because of its focus on online bank accounts. This arrangement enables the firm to profit from the size of a major bank without having to pay for the upkeep of a large bank’s branch network.
The Delaware State Bank Commissioner gave Capital One Financial Corporation (NYSE:COF) permission to finalize its acquisition of Discover Financial Services and its subsidiary, Discover Bank, on December 19. In February 2024, a final deal was reached between the two businesses to acquire Discover for $35.3 billion. It is anticipated that the deal will be finalized in early 2025.
The move has bolstered investor confidence in Capital One Financial Corporation (NYSE:COF). Amalthea Fund stated the following regarding the acquisition in its Q3 2024 investor letter:
“US Credit cards have become a concentrated business. The leading players in order are Chase, a part of JPMorgan, American Express, Citi, Capital One, Bank of America, and Discover. A combination of Capital One and Discover will become the number two player.”
Following Bank of America’s upgrade of the shares from Neutral to Buy, Capital One Financial Corporation (NYSE:COF) shares rose by 3%. The bank raised the firm’s price target from $207 to $235. BofA anticipates greater synergies compared to expectations from the company’s impending acquisition of Discover Financial Services.
Bullish optimism is further fueled by Capital One Financial Corporation’s (NYSE:COF) strong financial performance. The business reported $10.2 billion in net revenue for the fourth quarter of 2024. Compared to the same period of the previous year, when net income was $706 million, or $1.67 per diluted common share, it rose to $1.1 billion, or $2.67 per diluted common share, for the quarter. The stock rose by more than 10%, making it among the Best Warren Buffett Stocks.
Overall, COF ranks 8th on our list of the best Warren Buffett stocks to buy right now. While we acknowledge the potential for COF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stock To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
Terms and Privacy Policy
Search
RECENT PRESS RELEASES
Related Post
