The share price of Now Holdings (NYSE: NOW), a fintech company based in Latin America, has had a strange journey. In 2022, the shares lost more than 50% of their value. Then the stock will be more than in 2023 doubled in value.
This is a volatile position, but underneath it all lies one of the highest quality companies on the market today. And the company is backed by several billionaire investors, including an investing legend.
Despite its poor performance in recent years, Nu appears to be one of the highest upside stocks to add to your portfolio this year.
You’ll love these stats
When it comes to the numbers, Nu’s history really stands out. The company started in 2013 with the specific mission of disrupting the Latin American banking industry. For decades, this industry was controlled by a handful of players who largely operated brick-and-mortar locations. Innovation was limited as the established players in the market were not keen to shake up a highly profitable situation.
Unlike the competition, Nu offered its banking services directly through a smartphone app. Suddenly, millions of people had instant access to low-cost banking services with innovative business activities such as cryptocurrency trading. At the beginning of 2013, Nu actually had zero customers. Last month it surpassed 100 million.
There should also be more growth on the horizon; the Latin American region as a whole has more than 650 million people. The number of customers is already growing by almost 30% per year, while turnover is increasing by no less than 75% per year. The company became profitable in 2022 and net profit has grown every quarter since then. When it comes to the raw numbers, Nu is simply a growth machine.
So why is the stock price so volatile? It has more to do with the valuation of the market than with the underlying fundamentals. When the company went public, its shares were almost forty times more expensive than its turnover. Today, shares trade at just 8.8 times sales. Revenue has grown consistently, but the market has changed how much it is willing to pay from a valuation perspective. However, the valuation ratio has stabilized somewhat since 2023 and revenue continues to rise.
This legendary billionaire investor is betting big on Nu shares
There is one investor who has weathered the tough ups and downs so far: Warren Buffett. His holding company, Berkshire Hathaway, owns approximately 107,000 Nu shares worth approximately $1.3 billion. It’s a fairly small position for Berkshire, but the company only has a few dozen securities in its publicly traded portfolio.
Buffett isn’t the only billionaire involved. Now 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 is himself a billionaire, remains one of Nu’s biggest spenders.
Now shares aren’t cheap, judging by many traditional valuation measures. Although the price has fallen enormously, 8.8 times turnover is still a lot of money for a bank share. But Nu has shown that it can grow quickly and capture a large market share. In Brazil, for example, about half of all adults are Nu customers.
A proven, high-quality company backed by well-known billionaire investors should put Nu at the top of any growth investor’s buy list.
Should You Invest $1,000 in Nu Holdings Now?
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
2 Reasons to Buy Holdings Stock Now Like There’s No Tomorrow was originally published by The Motley Fool
