Any stock becomes more interesting when investors find out that Warren Buffett owns it. The investing guru's savvy stock picking has built Berkshire Hathaway into an empire and earned him a mass of fans who follow his every move.

One of his most recent purchases is Brazilian fintech company Nu Holdings (NU 0.93%), which doesn't seem like one of his typical stock picks. Why did Buffett buy it, and should you?

Nu's new way of banking

Nu opened its figurative doors in 2013 to offer an all-digital financial services solution for Latin American customers. It has seen a hugely positive response since then.

The company is headquartered in Brazil, where it does most of its business. It aims to be a one-stop shop app for banking and other financial services, including credit cards, digital payments, and even insurance, and sees a huge opportunity in the underbanked Latin American population. It has nearly 60 million customers, including at least 5 million who have their first-ever bank account or credit card with Nu. It strives to disrupt, and thus far has accomplished that.

That was further illustrated in the first quarter of 2022. Users increased 61% over last year, or by 5.7 million, in Brazil, Colombia, and Mexico. The Brazilian customer count of 57 million represents 33% of the adult population in that country. Average revenue per active customer (ARPAC) rose 63% to $6.70, and the company estimates that more than half of active users who have held an account for more than 12 months use their Nu account as their primary banking account.

Deposits increased 94% over last year to $12.6 billion. Nu also services small businesses with enterprise solutions, and small business clients increased 167% more than last year to more than 1.6 million.

The one-stop element is an important piece of the model, since the more products in a customer's box, the higher the overall engagement, leading to increased revenue for the company. Economies of scale also lead to reduced cost per user, and the average cost to service a customer decreased 30% over last year to $0.07. 

As an all-digital provider, its model is more cost effective, and it claims that its costs to serve customers are 85% lower than incumbents.

Revenue increased a whopping 226% year over year, and adjusted net income was $10.1 million, in contrast to an $11.9 million adjusted net loss last year. Net loss of $45 million in this year's first quarter was an improvement over a $49 million net loss last year, and part of the large reported loss was due to increased provisions for losses as opposed to operational deficiencies. 

Despite what seems like an already huge presence, its market opportunity is still enormous. The three countries it services right now have a combined population of about 400 million, a large percentage of which is still underbanked, acutely so in Mexico. Although a sizable portion of the Brazilian population has already signed on to the platform, it's still a tiny percentage in Mexico and Colombia, not to mention adjacent countries that it can enter into in the future.

Why does Buffett like it?

It's not hard to see the attraction here. This is a disruptive business that's well managed and making progress, not only in growth but also in cost management and profitability. Buffett likes bank stocks, which are cash rich and resilient. They generally trade at cheap valuations and pay back shareholders through high dividends and share buybacks.

Nu doesn't quite fit this model. But it is increasing its deposits, like a more standard bank, which allows it to operate new ventures and stay solvent. 

Despite Buffett's backing, the market hasn't been happy with Nu stock. It's down 63% this year and trades at less than $4 per share. That's mostly to do with the pushback against highly valued tech stocks. Even at what seems like a meager price, the valuation is still lofty. Shares trade at 12 times sales and almost four times book value. 

Nu looks like a great business making healthy progress with enormous potential for growth, and the shares may have bottomed out. If you can handle some risk and have the time and patience for the market to begin to recognize the growth opportunity, you may want to start with a small position here.