The market’s having a wild journey to this point in 2025, and the S&P 500 briefly entered correction territory last week sooner than swinging once more up. For model new consumers, it might presumably be a scary time. Nevertheless seasoned consumers know that not solely is that this par for the course, there’s a silver lining: You’ll uncover superb shares at terrific prices.
Nu Holdings (NYSE: NU) has underperformed the market in the midst of the earlier 12 months, up decrease than 1% whereas the S&P 500 is up 10%. Nonetheless, it’s starting to bounce once more. Is now the time to buy?
Nu provides digital banking and financial corporations in Brazil, Mexico, and Colombia. It has carved out a definite phase by opening in a space with vital entry boundaries for banking prospects, and members are drawn to Nu’s ease of use. It critiques fixed secure quarterly improvement, and the areas the place it operates nonetheless have little digital financial entry, giving it a healthful runway.
Inside the 2024 fourth quarter, earnings elevated 50% 12 months over 12 months foreign exchange neutral, and web earnings rose from $360.9 million to $552.6 million. Value to serve remained regular quarter over quarter at $0.80 per purchaser, which was a decrease from $0.90 the 12 months sooner than.
Nu was initially created to fulfill the needs of a mass inhabitants that wasn’t able to entry Brazil’s extraordinarily regulated and expensive banking system, nonetheless it’s catching on with anyone who’s looking out for a better banking experience. Although it already has 58% of the grownup inhabitants of Brazil as prospects, it continues in order so as to add 1 million new members month-to-month, and 61% of its month-to-month actives use Nu as their main banking account. Nu is now the third-largest monetary establishment in Brazil relating to members, nevertheless there’s rather a lot additional improvement to grab in Brazil. As an example, Ultravioleta prospects, its affluent shopper service, elevated 132% 12 months over 12 months, nevertheless the amount stays to be small at 688,000.
Nu’s has solely a modest presence in Mexico and Colombia, the place it launched after Brazil and it nonetheless doesn’t have full operations. It rolled out a high-rate monetary financial savings account in these two markets that’s attracting new members, and improvement is faster there than in Brazil. It ended 2024 with 10 million prospects in Mexico, a 91% year-over-year improve, or 12% of the grownup inhabitants. Down the street, there are numerous completely different adjoining nations Nu can enter that wouldn’t have optimum fintech choices.
Nu is a Warren Buffett stock, although it doesn’t pretty match the normal Buffett mould, since it’s a youthful improvement stock. He does love monetary establishment shares, nevertheless there’s one factor else notable about Nu that Buffett has talked about plenty of events that’s important in a implausible enterprise: A extreme return on equity (ROE). Nu’s low-overhead model yields extreme earnings, and Nu’s ROE was 28% in 2024, inserting it throughout the prime tier of financial institutions worldwide.