Buffett’s Billion Dollar Bet Is a Halloween Treat

It’s not every day that Warren Buffett bets big on a bank outside the United States, but his latest move suggests he sees something special in one international fintech company.

The stock, relatively unknown compared to Buffett’s flagship investments like Coca-Cola or Apple, serves millions across Latin America and is elbowing into our out, depending on how you look at it, traditional banks in regions where many people still lack access to traditional financial services.

What’s captivating isn’t just the potential for growth but the unique approach to expanding in a market that’s notoriously hard to break into.

Buffett’s pick has some unique advantages that play right into his favored strategy of finding businesses with durable competitive advantages, impressive scalability, and strong management. So what stock is it and is it a buy?

Key Points

• Nu’s digital-first approach targets Latin America’s unbanked, serving 93 million customers—a key reason Buffett sees growth potential.
• Low-cost operations, customer referrals, and AI-driven services create a strong moat that aligns with Buffett’s investment style.
• Analysts project upside to as high as $19 per share, citing Nu’s revenue growth and product lines as drivers of long-term profitability.

A New Way to Bank in Latin America

Nu Holdings (NYSE: NU), headquartered in Brazil, provides a suite of digital banking products tailored to a population where around 70% lack traditional banking services.

In contrast to brick-and-mortar banks, Nu operates as a digital-first, low-cost solution, removing barriers that have historically left much of Latin America unbanked.

The company serves over 93 million customers across Brazil, Mexico, and Colombia, making it one of the largest digital banks globally.

Buffett’s investment in Nu Holdings is a clear vote of confidence in the future of digital banking in emerging markets. Via Berkshire Hathaway, Buffett owns over $1.3 billion worth of Nu stock, making it one of Berkshire’s largest stakes outside the U.S.

What Most Investors Don’t Know About Nu Holdings

Despite being relatively young, Nu’s revenue growth has been exceptional, increasing at an astonishing rate year-over-year. Only in the last 3 quarters did top line growth dip below 100%+ annually, and even then it’s not far from that level.

Nu has been able to sustain this growth partly due to its innovative approach to customer acquisition. Unlike many of its peers, Nu doesn’t rely on costly advertising campaigns but instead relies on a referral-based model that lowers its customer acquisition costs and enhances customer loyalty.

Nu’s no stranger to artificial intelligence either and its AI-driven credit engine provides access to credit even for those with limited or no credit history. This rare capability has been instrumental in Nu’s high customer retention and cross-selling potential because it permits trustworthiness and loyalty among users who are often underserved by traditional banks.

Buffett’s Core Criteria

Nu’s nimble, digital-only setup allows it to scale rapidly without the burden of physical branches. This ability to grow fast and efficiently is especially crucial in Latin America, where infrastructure costs can be prohibitively high.

The company’s operating model also allows it to collect data on consumer behavior and make data-driven decisions that maximize profitability and customer satisfaction. This data-centric model is another factor that aligns with Buffett’s philosophy because it reflects a long-term strategy to delight customers and fend off rivals.

In addition, Nu’s geographic diversity in Brazil, Mexico, and Colombia mitigates regional risk, allowing it to capture significant market share across Latin America and offering the kind of steady growth that appeals to Buffett’s conservative, risk-averse style.

Is There Still Upside?

Nu’s growth potential has not gone unnoticed by Wall Street. The most optimistic analyst forecasts upside to $19 per share.

Several factors drive this optimistic forecast, including Nu’s expanding customer base, improved credit portfolio quality, and strong revenue growth from non-interest income sources, such as fees from payments and credit products.

Plus, analysts see room for margin growth as Nu continues to refine its AI-driven risk management, which has already shown promise in reducing defaults and boosting net interest income.

Is Nu a Buy?

Nu offers a rare combination of high growth, a scalable model, and a well-defined economic moat. Given the untapped market opportunity in Latin America, Nu appears set to capture meaningful growth in a region with one of the highest fintech adoption rates globally.

While top line growth has slowed somewhat it’s still extremely fast and shows enormous promise over the long haul.