The stock price of Nu Holdings (NU 0.07%), a fintech company based in Latin America, has had a strange journey. In 2022, its shares lost more than 50% of their value. Then in 2023 the stock more than doubled in value.
This is a volatile holding, but underneath is one of the highest-quality businesses on the market today. And the company happens to be backed by several billionaire investors, including an investing legend.
Despite a rocky performance in recent years, Nu looks like one of the highest-upside stocks you could add to your portfolio this year.
NYSE: NU
Key Data Points
You're going to love these statistics
When it comes down to the numbers, Nu's history really pops. The company got its start in 2013 with the specific mission of disrupting Latin America's banking industry. For decades, this industry was controlled by a handful of players largely operating physical branches. Innovation was limited, as market incumbents weren't keen on shaking up a highly profitable situation.
In contrast to the competition, Nu offered its banking services directly via a smartphone app. Suddenly, millions of people had instant access to low-cost banking services with innovative business lines like cryptocurrency trading. At the start of 2013, Nu essentially had zero customers. Last month, it surpassed 100 million.
More growth should be ahead as well -- the Latin American region as a whole contains more than 650 million people. Customer count is already growing at nearly 30% annually, with revenue rising by an astounding 75% per year. The company became profitable in 2022, and since then, net income has grown every quarter. When it comes to the raw numbers, Nu is simply a growth machine.
Why then has the stock price been so volatile? It has more to do with the market's valuation than the underlying fundamentals. When the company went public, shares were priced at nearly 40 times sales. Today, shares trade at just 8.8 times sales. Revenue has consistently grown, but the market has changed how much it is willing to pay from a valuation standpoint. The valuation multiple has somewhat stabilized since 2023, however, and revenue continues marching higher.
NU Total Return Level data by YCharts
This legendary billionaire investor is betting big on Nu stock
There's one investor who has thus far held through the heavy ups and downs: Warren Buffett. His holding company, Berkshire Hathaway, owns around 107,000 Nu shares worth roughly $1.3 billion. It's a fairly small position for Berkshire, but the company only holds a few dozen securities in its publicly traded portfolio.
Buffett isn't the only billionaire involved. Nu was originally backed by Sequoia Capital, one of the most renowned venture capital firms of all time. Doug Leone, a senior partner at the firm who happens to be a billionaire himself, continues to be one of Nu's biggest backers.
Nu stock isn't cheap judging by many traditional valuation metrics. Even though the multiple has come down tremendously, 8.8 times sales is still a lot to pay for a bank stock. But Nu has shown that it can grow rapidly, commanding huge chunks of market share. In Brazil, for instance, roughly half of all adults are Nu customers.
A proven, high-quality business backed by well-known billionaire investors should put Nu at the top of every growth investor's buy list.
