There are many stocks on the market today that have created millionaires. It all depends on how much you start with and how long you wait. Succeeding in the stock market is all about patience and letting the magic of compounding do its work.
But it certainly helps to choose winning growth stocks. If you're looking for the next magical millionaire maker, I suggest taking a look at Nu Holdings (NU 2.79%).
What's new about Nu
Nu is an all-digital bank operating out of Brazil. It's incredibly popular in Brazil, where the traditional banking system is highly regulated and there are strong barriers to entry for people in lower socio-economic brackets. Nu started out targeting the less affluent, offering easier entry as well as a simplified, easy-to-use digital app. Today, even the more affluent population is catching on to its better system, and more than half of the population in Brazil is on Nu's platform. They're engaging at higher rates and spending more money, and more people are using it as their primary bank account.
NYSE: NU
Key Data Points
As of the end of 2024, Nu has 114 million members, a 20.4 million increase year over year. The vast majority, or 101.8 million, are in Brazil. As much as it has already captured market share in Brazil, it continues to onboard new customers at a high rate. It also has plenty of room to run with converting new customers to more products, such as investing and credit products. You can see the growth here in average revenue per active customer (ARPAC), which increased 23% (currency neutral) to $10.70 in the fourth quarter.
It's also just getting started in Mexico and Colombia, where the growth runway is wide open. It's growing faster in these countries than in Brazil, and it has the same strategy of cross-selling that should ensure high growth for many years.
This is leading to high revenue growth, and since Nu's all-digital platform is low capital-intensive, to soaring profits. It has a low cost to serve, and while it's generally been stable, it actually decreased year over year in the fourth quarter from $0.90 to $0.80. Revenue increased 50% year over year in the quarter, and net income improved from $360.9 million to $552.6 million.
The Buffett growth stock
Nu is a surprising Warren Buffett pick, although it could have been one of his investing managers that picked it up for Berkshire Hathaway. Buffett doesn't usually go for risky growth stocks. As well as Nu has been performing, there's some risk associated with its youth as well as it operating in a volatile economy. The devaluation of the Brazilian Real is also a concern.
However, there are elements of Nu's business that are just up Buffett's alley. He loves bank stocks, probably because they're flush with cash, although he's picky about which bank stocks he likes and certainly wouldn't buy just any.
Nu has been a victim of Berkshire Hathaway's recent selling spree; Berkshire cut its position by 53% in the 2024 fourth quarter. That was certainly part of the recent negative investor sentiment, helped along by the currency concerns. I wouldn't worry about that too much; Berkshire also sold half of its Apple stock, and Buffett is still a huge fan of Apple.
With growth rates staying in the high double digits, and net income increasing at high levels, one can envision how Nu can reward investors as significant opportunities are available, especially in the newer regions it's expanding into. This isn't a stock for the highly risk-averse investor, but then again, there won't be too many high-growth stocks that fit that investing profile. For investors with some appetite for risk, Nu could be an outstanding growth pick that could supercharge their portfolio and help move them toward millionaire status.
