Since its founding about a decade ago, Nu Holdings (NU -3.25%) has grown into one of the world's largest digital financial services platforms. The company started on its journey to disrupt the financial services industry by launching a purple no-fee credit card in Brazil, a country known for its high-fee, low-tech financial system. It now serves over 105 million customers across Brazil, Mexico, and Colombia.
The financial technology company has grown from offering credit cards to providing customers with a range of banking and financial services. Its products and services include:
- Spending solutions: Credit and debit cards and mobile payments.
- Savings solutions: Personal and business accounts, including checking and savings accounts.
- Investing solutions: Investment accounts.
- Borrowing solutions: Personal loans and buy now, pay later.
- Protecting solutions: Life insurance and funeral benefits.
Savings Account
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 (BRK.A -0.33%)(BRK.B -0.56%), 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
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.
Step 3: Do your research
It's essential to thoroughly research a company before buying its shares. You should learn about its competitors, its balance sheet, how it makes money, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Continue reading to learn more about some crucial factors to consider before investing in Nu Holdings stock.
Step 4: Place an order
Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The stock ticker (NU for Nu Holdings).
- Whether you want to place a limit order or market order (The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.).
Once you complete the order page, click to submit your trade and become a Nu Holdings shareholder.
Stock Ticker
Should I invest?
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.
Profitability
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.
Dividends
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.
ETF options
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).
According to ETFChannel.com, 40 ETFs held shares of Nu Holdings as of mid-2024. The iShares Latin America 40 ETF (ILF -0.72%) had the largest allocation at 6.8%. It was the fund's fourth-largest holding. That decent allocation makes this ETF a solid option for investors who want to gain some passive exposure to Nu Holdings and other top stocks from Latin America.
Stock splits
Will Nu Holdings stock split?
Nu Holdings didn't have plans for an upcoming stock split as of mid-2024. The company has not completed a stock split since coming public in 2021 and won't likely split its stock anytime soon.
As of mid-2024, shares of Nu Holdings traded at around $13 per share, putting them slightly above their IPO price of $9 per share. The share price would need to gain significantly before Nu Holdings would need to split its stock to make it more accessible to investors.
Related investing topics
The bottom line on Nu Holdings
Nu Holdings has grown phenomenally over the past decade by adding new financial products and services and expanding into additional Latin American countries. It's still only scratching the surface of its potential, so it could continue delivering rapidly rising revenue and profits for investors, which could drive its stock price higher over the longer term.
While Nu Holdings has tremendous growth potential, it might not be the best stock for everyone. It trades at a lofty valuation and operates in Latin America, which tends to be a riskier region for investors. Those interested in investing in the company must thoroughly understand its business and its risks before buying shares.
FAQ
Investing in Nu Holdings FAQ
Is Nu Holdings a good stock to buy?
Nu Holdings has rapidly become one of the world's largest digital financial services platforms. However, even with more than 105 million customers in three Latin American countries (as of mid-2024), it still has a long growth runway ahead. It could continue increasing its revenue and profits at an above-average pace for years to come, driving its stock price higher in the future.
On the downside, Nu Holdings trades at a relatively elevated valuation, at nearly 32 times its forward earnings and about 9.5 times its price-to-sales ratio, as of mid-2024. It will need to continue growing rapidly to justify that valuation. While its stock price could be volatile, it has all the makings of a good stock to buy, especially for those seeking a high-growth opportunity.
What kind of business is Nu Holdings?
Nu Holdings is a large digital financial services platform focused on Latin America. It currently has operations in Brazil, Mexico, and Colombia. The company uses its proprietary technology to provide customers with various financial solutions across spending, savings, investment, lending, and insurance.
Why invest in Nu Holdings?
Nu Holdings' main draw as an investment is its growth potential. The company has already grown tremendously since launching more than a decade ago. Its customer count has doubled over the past two years, while revenue has increased fivefold. That has enabled Nu Holdings to turn the corner on profitability, which is rising rapidly.
The digital financial services company has a long growth runway ahead. Its 105 million customers across three Latin American countries are only scratching the surface of the largely underbanked region of more than 650 million people. Nu Holdings' ability to continue profitably growing its financial services business could enrich shareholders over the long term.
Is Nu Holdings profitable?
Nu Holdings turned the corner on profitability during the third quarter of 2022 -- when it reported $7.8 million in net income -- and has delivered increasing profitability ever since. Its profits hit almost $487.3 million during the second quarter of 2024. The company expects to continue growing its earnings as its operations in Mexico and Colombia eventually join Brazil in producing profits.
