Cathie Wood and Warren Buffett have contrasting investment philosophies. Wood, CEO of Ark Invest, targets emerging technologies like artificial intelligence and genomics. Buffett, chairman of Berkshire Hathaway, favors stable, blue-chip stocks over the high-risk volatility of growth sectors.
Yet, despite these differences, they overlap in one surprising place: Nu Holdings (NYSE: NU). This fintech company, which focuses on Latin and South America, is a shared holding in both Ark Invest and Berkshire Hathaway portfolios.
Why? Let’s explore what makes Nu Holdings a compelling investment and why 2025 could mark a turning point for this fintech player.
Nu’s Strong Operating Performance
Nu is a digital financial services platform offering a range of products, including checking and savings accounts, investments, and loans. Historically, the company’s primary markets have been Brazil, Colombia, and Mexico. However, in December, Nu expanded its ambitions by investing in the digital banking platform Tyme Group, which has 15 million customers across South Africa and the Philippines.
As of the third quarter of 2024, Nu reported 110 million members, reflecting 23% year-over-year growth. Its average revenue per user (ARPU) also increased incrementally to $11.
By increasing customer profitability, Nu has widened its margins and bolstered its bottom line. The company’s gross margin grew by 300 basis points, and net income surged 83% year over year to $553 million.
Nu’s Valuation: Attractive or Under Pressure?
Nu’s valuation stands out when compared to its international fintech peers, particularly in its price-to-sales (P/S) ratio. While its P/S places it in the middle of the pack, the underlying trend is notable.
“Nu’s P/S has been steadily declining over the last few months,” the article notes, attributing this to macroeconomic challenges in Latin America, especially Brazil. Inflation and economic instability in the region have weighed on investor sentiment, yet these issues may not justify a bearish outlook on the stock.
Nu and SoFi: Parallels in Fintech
Nu’s trajectory draws comparisons to another fintech player, SoFi (NASDAQ: SOFI). Like Nu, SoFi offers a range of financial services through a mobile app, with lending as its largest revenue driver.
SoFi’s struggles during the Federal Reserve’s aggressive rate hikes in 2022 and 2023 were notable. “These moves significantly impacted SoFi’s lending operation, and for a prolonged period of time, investors fled the stock.”
However, as the Fed began cutting rates in mid-2024, SoFi experienced a significant rebound, with its stock climbing more than 80% in the months following the first rate cut.
Nu faces similar short-term challenges due to Brazil’s economic climate, but the long-term outlook remains promising. As the article suggests, “Economic conditions eventually begin to shift and improve in the long run.”
Why Nu Has Long-Term Potential
Despite near-term macroeconomic concerns, Nu’s fundamentals signal robust long-term growth. The company’s rising user base, cross-selling opportunities, expanding profits, and global ambitions underscore its potential.
“Nu reminds me of SoFi,” the article observes, “and I think the stock is a bargain for investors with a long-term mindset.”
Don’t Miss Out
If Nu follows the trajectory of similar fintech companies, 2025 could be a breakout year. For investors with patience and a willingness to navigate short-term volatility, Nu represents a unique opportunity.