Published on July 24th, 2022 by Felix Martinez
Berkshire Hathaway (BRK.B) has an equity investment portfolio worth more than $360 billion as of the end of the 2022 first quarter.
Berkshire Hathaway’s portfolio is filled with quality stocks. You can ‘cheat’ from Warren Buffett stocks to find picks for your portfolio. That’s because Buffett (and other institutional investors) are required to periodically show their holdings in a 13F Filing.
You can see all Warren Buffett stocks (along with relevant financial metrics like dividend yields and price-to-earnings ratios) by clicking on the link below:
Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.
As of March 31, 2022, Buffett’s Berkshire Hathaway owned just over 107 million Nu Holdings (NU) shares for a total market value exceeding $452 million. Nu Holdings currently constitutes over 0.1% of Berkshire Hathaway’s investment portfolio.
This article will thoroughly examine Nu Holdings’s prospects as an investment today.
Nu Holdings Ltd is engaged in providing digital banking services. It offers several financial services such as Credit cards, Personal accounts, Investments, Personal Loans, Insurance, Mobile payments, Business accounts, and Rewards. Nu Holdings is the parent company of Nubank, a leading digital bank in LATAM. The Brazil-based company was founded back in 2013 by David Vélez. As a digital bank, all customers’ banking activities are done online. The company has grown substantially over the past few years, with over 40 million active customers, making it one of the largest digital banking platforms in the world.
On May 16, 2022, the company reported first-quarter results for 2022. The company saw a net add of 5.7 million customers in the quarter and 22.5 million year-on-year (YoY), reaching a record 59.6 million customers and consolidating Nu’s position as one of the largest digital banking platforms in the world.
Revenues came in at $877.2 million, a 226% YoY increase on an FX neutral basis (FXN), and Monthly Average Revenue per Active Customer (ARPAC) of $6.70 was an increase of 63% FXN YoY. Across Latin America, the company saw Mexico, Nu´s customer base increased 950% YoY to 2.1 million, consolidating the company’s position as the #1 new issuer in the country. Customers in Colombia reached 211,000.
Net income was $10.1 million compared to a loss of $11.9 million for the first quarter of 2021. Also, net income is up 215.6% compared to the previous quarter.
Source: Investor Presentation
In 2013, Nubank entered the credit card business, which continues to expand. In 2017, Nubank launched digital banking accounts with deposits, peer-to-peer transfers, and free-of-charge payments.
In 2018, a credit card NU offer was available with a savings account with a rate of return equivalent to the Brazilian deposit rate. Also worth mentioning, the company promoted its business checking and investment brokerage products in 2020 and 2021, respectively.
Throughout 2022 Q1, it commenced some other two new products, NUPay and Nu Crypto. NU has now built its economic ecosystems with 59.6M consumers and 1.6M small businesses as one of the international’s largest digital banking structures.
Looking at the below image, we see that there are still a lot of opportunities for growth for the company. In Mexico, 75% of the population does not have a credit card. Also, 64% of the population in Brazil is without a credit card.
Source: Investor Presentation
Competitive Advantages & Recession Performance
The main competitive advantage for NU is its low-cost business model. Because of its recent growth, the company’s cost per active customer has declined in the first quarter of 2022. The last quarter for active customers cost the company $98 million. Now with even more customers, it costs the company $96 million.
The cost saving helps set the company apart from other companies trying to get into this space. Another advantage that the company is it’s trusted and recognized brand.
Source: Investor Presentation
The company is new, so there is no data on how well the company performed during a recession. However, like most banks, we expect the company to be hit hard during a recession. The company is growing cash and cash equivalents from $2.3 billion to $2.7 billion. This will help the company to navigate during a downturn. Also, the company had $370 million in debt, giving it enough capital to navigate through the weakening economic cycle.
Valuation & Expected Returns
It is had to evaluate the valuation of a new company like NU. However, we will evaluate the company based on Enterprise value-to-sales (EV/sales). The company is valued at a forward EV/sales ratio of 3.9.
Nu Holdings is also projected to continue its strong growth. According to analysts, the company is estimated to grow revenue by 47% in 2023 further. The increase in revenue will put the company’s FY23 EV/sales ratio at 2.6, much more in line with peer’s multiples.
Thus, considering its tremendous growth potential, we think the company looks to be undervalued.
Nu Holdings Ltd looks like a fantastic company with plenty of growth ability because of the underserved markets of LATAM. A considerable percentage of the populace in countries like Brazil, Mexico, and Colombia remains unbanked, which presents a massive opportunity for Nu Holdings to strengthen its market shares.
The organization likewise launches new services to enlarge its environment and improve monetization. The current quarterly record verified that this approach is working, with sales up over 258% and revenue according to consumers almost doubled. The present-day valuation is aligned with its peer, yet Nu is growing much quicker. We consider a higher value must be warranted due to its sturdy growth. Therefore, we think that the company as a buy for speculative investors.
Other Dividend Lists
Value investing is a valuable process to combine with dividend investing. The following lists contain many more high-quality dividend stocks:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 45 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: