Nu Holdings, a Latin American fintech company, has caught the attention of two prominent investors with contrasting strategies: Warren Buffett and Cathie Wood. Despite their differing approaches, both have invested heavily in the company, with Berkshire Hathaway pouring in $1.4 billion and ARK Invest allocating $20 million. Nu Holdings has revolutionized the banking industry in Brazil, Mexico, and Colombia by offering financial services through smartphones.
This approach has disrupted the market previously dominated by a few large banks, leading to a customer base of over 100 million within its first decade of operation. The company has expanded its offerings, including a crypto trading platform that attracted more than a million users in its first month. These developments have significantly boosted Nu’s financials, with annual sales growing from $2 billion to nearly $8 billion in just two years.
Analysts project an average earnings growth of 54% annually over the next five years. Buffett and Wood’s involvement highlights the substantial potential in Nu Holdings. Despite a volatile debut that saw shares lose 70% of their value post-IPO, they have since rebounded, demonstrating resilience.
Investors focus on Nu’s growth potential
Investors considering following Buffett and Wood should be prepared for the inherent volatility of high-growth stocks. While the long-term potential is promising, the journey is likely to be marked by fluctuations in market sentiment.
Nu Holdings presents an intriguing investment opportunity with a compelling growth narrative and a robust business model. However, patience and a long-term perspective are crucial for investors looking to capitalize on this potential. Shares of Nu Holdings currently trade at 42 times earnings, which may seem high but is reasonable given the company’s rapid growth.
Analysts expect earnings to grow by more than 50% per year over the next five years, making the current valuation attractive for potential investors. It’s important to note that high-growth stocks like Nu Holdings can be highly volatile in the short term. The company’s trading history is a testament to this fact.
However, for investors willing to buy and hold through temporary swings, Nu Holdings could offer significant rewards in the long run.
