The market’s having a wild experience up to now in 2025, and the S&P 500 briefly entered correction territory final week earlier than swinging again up. For brand spanking new buyers, it might be a scary time. However seasoned buyers know that not solely is that this par for the course, there is a silver lining: You will discover glorious shares at terrific costs.
Nu Holdings (NYSE: NU) has underperformed the market through the previous yr, up lower than 1% whereas the S&P 500 is up 10%. Nevertheless, it is beginning to bounce again. Is now the time to purchase?
Nu offers digital banking and monetary companies in Brazil, Mexico, and Colombia. It has carved out a distinct segment by opening in a area with vital entry limitations for banking prospects, and members are drawn to Nu’s ease of use. It studies constant stable quarterly progress, and the areas the place it operates nonetheless have little digital monetary entry, giving it a wholesome runway.
Within the 2024 fourth quarter, income elevated 50% yr over yr forex impartial, and web earnings rose from $360.9 million to $552.6 million. Price to serve remained secure quarter over quarter at $0.80 per buyer, which was a lower from $0.90 the yr earlier than.
Nu was initially created to satisfy the wants of a mass inhabitants that wasn’t in a position to entry Brazil’s extremely regulated and costly banking system, nevertheless it’s catching on with anybody who’s in search of a greater banking expertise. Though it already has 58% of the grownup inhabitants of Brazil as prospects, it continues so as to add 1 million new members month-to-month, and 61% of its month-to-month actives use Nu as their major banking account. Nu is now the third-largest financial institution in Brazil by way of members, however there’s a lot extra progress to seize in Brazil. For instance, Ultravioleta prospects, its prosperous shopper service, elevated 132% yr over yr, however the quantity continues to be small at 688,000.
Nu’s has only a modest presence in Mexico and Colombia, the place it launched after Brazil and it nonetheless would not have full operations. It rolled out a high-rate financial savings account in these two markets that is attracting new members, and progress is quicker there than in Brazil. It ended 2024 with 10 million prospects in Mexico, a 91% year-over-year enhance, or 12% of the grownup inhabitants. Down the road, there are numerous different adjoining nations Nu can enter that do not have optimum fintech options.
Nu is a Warren Buffett inventory, though it would not fairly match the traditional Buffett mildew, since it is a younger progress inventory. He does love financial institution shares, however there’s one thing else notable about Nu that Buffett has talked about a number of instances that is essential in a terrific enterprise: A excessive return on fairness (ROE). Nu’s low-overhead mannequin yields excessive income, and Nu’s ROE was 28% in 2024, inserting it within the high tier of economic establishments worldwide.