How to Invest in Nu Holdings

Nu Holdings sees a massive opportunity to disrupt Latin America's more than $1 trillion financial services market. The region has roughly 650 million people who are either largely underbanked and unsatisfied with their current high-cost banking relationships or completely unbanked. While it has already grown to serve more than 105 million customers across three countries, it has a long growth runway ahead.

The company's growth potential has caught the attention of investors, including Warren Buffett. His company, Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), invested $500 million into Nu Holdings in 2021 before it completed its initial public offering (IPO). Buffett's company still owned over $1.3 billion of the company's stock in mid-2024.

Buffett's investment in the company and its growth potential might have you considering investing in its stock. Here's a step-by-step guide on how to buy shares of the fintech stock and some factors to consider before adding it to your portfolio.

How to buy Nu Holdings stock

There are a few steps you'll need to take before buying shares of Nu Holdings. This guide will show you how to go about adding the digital financial services platform to your portfolio.

Step 1: Open a brokerage account

You'll want to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time researching the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You shouldn't invest any money that you can't afford to lose or will need in the next three to five years. You'll then want to figure out how to allocate that money.

The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years. You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Should I invest in Nu Holdings?

You must thoroughly research any company before investing in its stock. On the one hand, the process might lead you to discover something that changes your mind about buying shares. On the other hand, it could further confirm your conviction that the stock is an attractive investment. With that in mind, here are some reasons why you might want to buy shares of Nu Holdings:

• You're seeking a high-growth investment opportunity.
• You think shares of Nu Holdings can meaningfully outperform the S&P 500 over the next three to five years.
• You believe Nu Holdings could disrupt the banking system in Latin America.
• You like to invest in founder-led companies.
• You like to follow Warren Buffett and invest in stocks his company owns.
• You don't need to earn dividend income from your investment.
• Investing in Nu Holdings would help you build a more diversified portfolio by adding some exposure to the financial sector and Latin America.
• You're comfortable with Nu Holdings' lofty valuation, which you think the company will grow into eventually.
• You understand the risks, including the possibility that shares of Nu Holdings could lose value.

Meanwhile, here are some factors to consider that might lead you away from investing in Nu Holdings:

• You're cautious about investing in companies based outside the U.S. and Latin America in particular.
• You already own several financial stocks.
• You're concerned about the global economy and worry that a recession could slow Nu Holdings' growth and potentially impact its earnings if customers were to fall behind on paying their credit cards or other loans.
• You're a bit concerned about Nu Holdings' higher valuation.
• You're seeking investments with lower stock price volatility than Nu Holdings.
• You're not really a fan of Warren Buffett or his investing style.
• You're in or nearing retirement and need investments that generate income.

Is Nu Holdings profitable?

Crunching the numbers and analyzing a company's profitability is crucial to an investor's stock research process. Earnings growth typically powers stock price performance over the longer term.

At the holding company level, Nu was profitable during the second quarter of 2024. The digital financial platform reported $487.3 million of net income in the period on $2.8 billion of revenue.

Nu's profitability has significantly improved over the past year. Its net income skyrocketed 134% in the second quarter, while its revenue surged 65% to a new record.

After reporting losses in its first several quarters as a public company, Nu Holdings turned the corner on profitability in the third quarter of 2022 and hasn't looked back. Its net income has soared over the past year:

As the image showcases, the company's profits have grown rapidly over the past year, driven in part by a rising profit margin.

Does Nu Holdings pay a dividend?

Nu Holdings had not initiated a dividend as of mid-2024. The company is still relatively young (it launched in 2013 and completed its IPO in 2021). It currently has no plans to start making dividend payments. While profitable, Nu retains those earnings to fund its operations and continued expansion.

ETFs with exposure to Nu Holdings

Instead of buying shares directly and actively investing in Nu Holdings, investors could go the passive investment route by buying a fund that holds its stock. One of the most common passive investment vehicles is an exchange-traded fund (ETF).

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