$NU is Warren Buffett's Largest Investment by Shares -Here's Why
Why has Buffett purchased a lot of shares of Nu Holdings, specifically?
For starters, the company has grown its customer base to 70.9 million clients in just over a year since going public. Nu Holdings provides credit cards to people who are not eligible to get one through other banks & tries to minimize risk by reducing the eligible benefits that the customer is initially eligible for. As they pay their bills on time, they unlock more benefits & more credit limits.
Another reason is its management. It's no secret that Buffett likes to invest in companies with good management. As he once said, “When we own portions of outstanding businesses with outstanding management, our favorite holding period is forever.”
Nu Holdings has recently hired David Marcus (former president of PayPal & former Meta Board member) on March 6 to be part of its Board of Directors. It’s expected that David will play a crucial role in Nu’s journey going forward.
The rest of the management team brings a lot of experience to the table as well:
CEO, David Velez, was a partner at Sequoia capital between January 2011 & March 2013. He also worked for Goldman Sachs, Morgan Stanley, and General Atlantic.
CGO, Cristina Junqueira, worked for a Boston Consulting group before founding Nu Holdings in 2013.
CFO, Guilherme Lago, worked in Credit Suisse Group AG & Mckinsey as well.
CPO, Jagpreet Duggal, worked as a director of product management at Facebook.
So you can see Nu’s management team has significant experience in this sector and under their leadership, Nu Holdings grew its revs from $1.7 billion in 2021 to $4.8 billion in 2022 - a 182.3% increase YoY.
Nu Holdings’ Edge - Brazil’s Unbanked Population
Before Nu Holdings started, over 55 million Brazillians were unbanked. This is because it's notoriously difficult for people who are not wealthy to obtain credit cards in Brazil. In general, it's very difficult to get a credit card in Latin America without being one of the wealthy elite.
By offering credit cards to people who would not be able to obtain one any other way, Nu has captured a large, untapped market. This is the main reason Nu is as successful as it is today.
Compared to SOFI, Nu Holdings has a much larger client base, this is of course due to its operations in Brazil, Mexico, & Columbia which in total have a larger population than the US. Thanks in part to these widespread operations, Forbes listed Nu Holdings as one of the world’s best banks in 2022.
Nu Holdings has a larger client base, more revenues, and is growing at a much faster rate than SoFi. The main reason for this is the fact that Nu Holdings doesn’t have as many competitors as SoFi, especially since they focus on an untapped market in Latin America. With SoFi, they have competitors right, left, and center due to established banks and fintech competitors. Nu Holdings became profitable Q3 2022 - only a year after its inception. After making a net profit of $7.8 million in Q3, it went on to make $58 million the next quarter and is on track to report an EPS of $0.02 & $1.393B in revenues in Q1 2023
Whereas, SOFI is still struggling to become profitable and is forecast to make an EPS of $-0.077 & $442.262M in revenue in Q1 2023.
How are Nu Holdings & SoFi similar?
But Nu Holdings & SoFi share one very important thing in common. They both want to be a one stop shop for financial services.
Since SoFi specializes in student loan refinancing, it creates a bond with younger customers who - hopefully - will turn into lifelong customers that use SoFi for all their banking needs. Similarly, Nu Holdings offers credit cards to customers younger than 18 in Brazil - capturing a demographic of young people who will hopefully become lifelong customers.
This means that both companies could continue to grow and expand as their customer base grows older and younger generations adopt their services as well.
Conclusion:
So in conclusion, I think SOFI is in a fairly safe spot as long as the Supreme Court gives a favorable ruling. Since Nu Holdings operates in Latin America it won’t compete with SoFi for market share. Ally & SoFi also have different specializations but Ally is a more established FinTech company which could take customers from SoFi. Still, SOFI’s goal is to become a one stop shop for all financial services and it has diversified its services extensively over the years which could give it an edge in this industry.
Personally, I believe SOFI will be able to grow its customer base better than ALLY because it appeals directly to young adults heading into college. If these customers have a good experience, then SOFI can become their go-to financial service provider for the rest of their life.
On this note, the FinTech industry is on track for major growth especially since Covid-19 acted as a catalyst for the industry - leading to wider adoption at a time when contactless payments were becoming essential.
Besides this, the FinTech industry will likely continue to grow just out of sheer practicality. For one thing, Fintech cuts down servicing costs like maintaining physical branches while still providing a very high value service. As more and more transactions move online, the digital revolution continues to work in the industry’s favor and the widespread adoption of smartphones means that our phones will increasingly act as wallets. So it's not surprising that the use of Fintech companies increased 88% from 2020 to 2021.
Technical Analysis:
Compared to ALLY and SOFI, NU has not dropped as dramatically, which is likely due to its exposure to Latin American markets rather than the US.
The stock is currently trending downwards within the sideways channel. The stock is testing the 200 MA on the daily chart, if it breaks through it I will be going short with the lower trendline as my take profit and the 50 MA as my SL.
For starters, the company has grown its customer base to 70.9 million clients in just over a year since going public. Nu Holdings provides credit cards to people who are not eligible to get one through other banks & tries to minimize risk by reducing the eligible benefits that the customer is initially eligible for. As they pay their bills on time, they unlock more benefits & more credit limits.
Another reason is its management. It's no secret that Buffett likes to invest in companies with good management. As he once said, “When we own portions of outstanding businesses with outstanding management, our favorite holding period is forever.”
Nu Holdings has recently hired David Marcus (former president of PayPal & former Meta Board member) on March 6 to be part of its Board of Directors. It’s expected that David will play a crucial role in Nu’s journey going forward.
The rest of the management team brings a lot of experience to the table as well:
CEO, David Velez, was a partner at Sequoia capital between January 2011 & March 2013. He also worked for Goldman Sachs, Morgan Stanley, and General Atlantic.
CGO, Cristina Junqueira, worked for a Boston Consulting group before founding Nu Holdings in 2013.
CFO, Guilherme Lago, worked in Credit Suisse Group AG & Mckinsey as well.
CPO, Jagpreet Duggal, worked as a director of product management at Facebook.
So you can see Nu’s management team has significant experience in this sector and under their leadership, Nu Holdings grew its revs from $1.7 billion in 2021 to $4.8 billion in 2022 - a 182.3% increase YoY.
Nu Holdings’ Edge - Brazil’s Unbanked Population
Before Nu Holdings started, over 55 million Brazillians were unbanked. This is because it's notoriously difficult for people who are not wealthy to obtain credit cards in Brazil. In general, it's very difficult to get a credit card in Latin America without being one of the wealthy elite.
By offering credit cards to people who would not be able to obtain one any other way, Nu has captured a large, untapped market. This is the main reason Nu is as successful as it is today.
Compared to SOFI, Nu Holdings has a much larger client base, this is of course due to its operations in Brazil, Mexico, & Columbia which in total have a larger population than the US. Thanks in part to these widespread operations, Forbes listed Nu Holdings as one of the world’s best banks in 2022.
Nu Holdings has a larger client base, more revenues, and is growing at a much faster rate than SoFi. The main reason for this is the fact that Nu Holdings doesn’t have as many competitors as SoFi, especially since they focus on an untapped market in Latin America. With SoFi, they have competitors right, left, and center due to established banks and fintech competitors. Nu Holdings became profitable Q3 2022 - only a year after its inception. After making a net profit of $7.8 million in Q3, it went on to make $58 million the next quarter and is on track to report an EPS of $0.02 & $1.393B in revenues in Q1 2023
Whereas, SOFI is still struggling to become profitable and is forecast to make an EPS of $-0.077 & $442.262M in revenue in Q1 2023.
How are Nu Holdings & SoFi similar?
But Nu Holdings & SoFi share one very important thing in common. They both want to be a one stop shop for financial services.
Since SoFi specializes in student loan refinancing, it creates a bond with younger customers who - hopefully - will turn into lifelong customers that use SoFi for all their banking needs. Similarly, Nu Holdings offers credit cards to customers younger than 18 in Brazil - capturing a demographic of young people who will hopefully become lifelong customers.
This means that both companies could continue to grow and expand as their customer base grows older and younger generations adopt their services as well.
Conclusion:
So in conclusion, I think SOFI is in a fairly safe spot as long as the Supreme Court gives a favorable ruling. Since Nu Holdings operates in Latin America it won’t compete with SoFi for market share. Ally & SoFi also have different specializations but Ally is a more established FinTech company which could take customers from SoFi. Still, SOFI’s goal is to become a one stop shop for all financial services and it has diversified its services extensively over the years which could give it an edge in this industry.
Personally, I believe SOFI will be able to grow its customer base better than ALLY because it appeals directly to young adults heading into college. If these customers have a good experience, then SOFI can become their go-to financial service provider for the rest of their life.
On this note, the FinTech industry is on track for major growth especially since Covid-19 acted as a catalyst for the industry - leading to wider adoption at a time when contactless payments were becoming essential.
Besides this, the FinTech industry will likely continue to grow just out of sheer practicality. For one thing, Fintech cuts down servicing costs like maintaining physical branches while still providing a very high value service. As more and more transactions move online, the digital revolution continues to work in the industry’s favor and the widespread adoption of smartphones means that our phones will increasingly act as wallets. So it's not surprising that the use of Fintech companies increased 88% from 2020 to 2021.
Technical Analysis:
Compared to ALLY and SOFI, NU has not dropped as dramatically, which is likely due to its exposure to Latin American markets rather than the US.
The stock is currently trending downwards within the sideways channel. The stock is testing the 200 MA on the daily chart, if it breaks through it I will be going short with the lower trendline as my take profit and the 50 MA as my SL.
