Warren Buffett's Berkshire Hathaway owns dozens of stocks in its massive $400 billion portfolio. Investors are certainly familiar with the top holdings, such as Apple, Bank of America, and American Express. But there are smaller positions that can't be ignored.
In fact, there's one Buffett stock that looks like it might be a screaming buy right now. Read on to learn more about this booming fintech enterprise and why it deserves a spot in your portfolio.
Taking over Latin America's banking sector
If you're not already, you should become familiar with Nu Holdings (NYSE: NU). Founded in 2013, the business provides various financial services, like checking accounts, credit cards, loans, brokerage services, and insurance products, all via a digital app. Nu started with a focus only on the Brazilian market. However, the company now has a presence in Mexico and Colombia.
Nu Holdings does not operate physical bank branches. This key characteristic is probably why the business has found tremendous success. Latin America is a developing region, especially when compared to the U.S. As internet and smartphone penetration expands, Nu will have a favorable backdrop to keep growing. Management claims that Nu is the largest digital banking platform outside of Asia. That helps illustrate how big the company's operations have become.
What's noteworthy is that Berkshire Hathaway has owned Nu shares since its initial public offering in December 2021. It's been a volatile ride since then. But the Oracle of Omaha hasn't sold any shares. And since the start of 2023, the stock has soared 212%.
Huge growth and rising profits
One of Nu's main selling points is that the business continues to post monster growth. During the first quarter of this year (ended March 31), the company reported revenue increased 64% year over year to $2.7 billion. That figure is 11-fold higher than it was just three years ago.
Perhaps more notable, Nu now has more than 100 million customers that use its products and services. This is a tremendous feat. And it clearly shows how well its offerings are resonating with consumers in its three markets.
While the growth will inevitably slow at some point, it's easy to be optimistic about Nu's long-term prospects. According to Latin America Reports, 70% of people in Latin America are either unbanked or underbanked. Nu's focus on integrating tech to provide a wonderful user experience should continue to help bring in new customers.
You'd be forgiven if you assumed that Nu wasn't profitable, mainly because most companies that are growing this rapidly aren't. But that's not the case here. Nu's scalable business model is starting to shine, with net income coming in at $379 million in Q1, up 167% versus the year-ago period.
Nu's valuation is compelling
Berkshire Hathaway's endorsement of a fintech enterprise with rapidly rising revenue and profits should easily draw prospective investors to scoop up shares. But what makes Nu Holdings stock a screaming buy at this particular moment is the valuation.
Shares trade at a forward price-to-earnings (P/E) ratio of 31.2. At first glance, this doesn't look like a bargain. But understand that Nu's profits are soaring. Between 2023 and 2026, earnings per share (EPS) are expected to increase at a compound annual rate of 54%, according to Wall Street consensus analyst estimates.
So shares currently trade at under 17 times the 2026 estimated EPS, which is attractive. And even if we assume that profit growth will slow down meaningfully after 2026, the valuation still looks compelling as the bottom line continues to expand at a nice clip.
Should you invest $1,000 in Nu Holdings right now?
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
1 Warren Buffett Stock That's a Screaming Buy Right Now was originally published by The Motley Fool