This Dirt-Cheap Warren Buffett Stock Could Help Make You Rich
Warren Buffett is one of the most successful investors of all time, with his holding company Berkshire Hathaway returning a market-beating 20% annually since he took the helm in 1965. Home furniture company RH (NYSE: RH) joined the portfolio in late 2019, and Berkshire now owns 2.36 million shares of the company, valued at roughly $581 million. Let's discuss why RH could also have a place in your investment portfolio.
Founded in 1979 as Restoration Hardware, RH is an upscale home furnishing store that sells items ranging from furniture to lighting fixtures through its network of galleries and outlets throughout the United States and Canada. Like many retail companies, its business faces macroeconomic headwinds related to inflation and rising interest rates. Third-quarter earnings highlight the impacts of these challenges.
Revenue dropped by 14% to $869 million, while operating profits fell by 38% to $170.3 million. As a home goods company, RH's business depends on the strength of the housing market. But when the Federal Reserve hikes interest rates, mortgages become more expensive, then home sales slow, and RH's business model takes a hit. CEO Gary Friedman expects these negative business trends to continue for the next several quarters. But over the long term, RH's core thesis remains intact.
Source Fool.com
