Down 31%, Should You Buy This Warren Buffett Stock Right Now?

Despite being a seller in recent times, Berkshire Hathaway owns numerous stocks in its huge $290 billion public equities portfolio. While Apple, American Express, and Coca-Cola get a lot of the attention, there are lesser-known businesses that investors shouldn’t ignore.

For example, the Oracle of Omaha’s conglomerate has owned one financial technology enterprise since December 2021. Its shares might be down 31% from their all-time record, but should you still buy this Warren Buffett stock right now?

Impressive growth trajectory

Buffett’s investment philosophy focuses on established companies that are leaders in their respective industries. That’s why it might be a surprise that Berkshire owns 0.8% of the outstanding shares of Nu Holdings (NU -0.87%), the digital banking powerhouse that offers various financial services products in Brazil, Colombia, and Mexico.

This is a rapidly growing company. It has found remarkable success catering to a part of the world that has a big underbanked and unbanked population. Nu’s focus on using technology to better serve customers has been a winning strategy.

Revenue grew 1,782% from $612 million in 2019 to $11.5 billion in 2024. This was supported by a customer base that expanded nearly six-fold during that time. More than half of adults in Brazil are Nu customers. Colombia and Mexico, while newer markets, also have huge potential. There’s also opportunity to enter other Latin American countries.

Nu’s growth story is certainly impressive. It should continue as management takes advantage of cross-selling opportunities, smartphone and broadband penetration rise, and general economic growth. Part of the leadership team’s long-term vision is to create “a global AI-driven digital banking model.”

However, investors need to be mindful of macro risks. It can vary, but some nations in the region deal with high inflation rates and/or geopolitical turmoil. This can have a sizable effect on Nu’s ongoing success.

Show me the profits

Nu fits Buffett’s criteria in one important way: It’s a very profitable business. This wasn’t always the case. In 2022, the company registered a net loss of $365 million. That bottom line has improved drastically, with Nu posting $2 billion in net income and a net profit margin of 17% in 2024.

Having greater scale helps in this regard. Nu’s largest expenses, like customer support and operations and general and administrative, are being better leveraged thanks to a higher revenue base. In order to bring on more customers and drive more sales, operating expenses likely do not need to grow at the same pace as the top line. Indeed, consensus analyst estimates call for earnings per share to rise at a 40% compound annual rate over the next three years, faster than the 32% pace of revenue.

It’s also worth diving a bit deeper. Investors should learn about Nu’s unit economics. In the fourth quarter, it cost the business $0.80 to serve each of its customers on a monthly basis. However, the company brought in $10.70 per active customer during that same period. That’s a strong position to be in. Operating a fully digital format, without an expensive physical branch network, probably helps in this regard.

Too hard to pass up

Nu is a good enough business to have made it into Berkshire’s portfolio. Its growth and profits should definitely draw the attention of the average investor, too.

With the stock’s sell-off over the past few months, the valuation is too hard to pass up. At a forward P/E ratio of 19.8, shares trade at a valuation that’s cheaper than the S&P 500. Based on the facts presented, Nu has the potential to be a successful investment over the next five years, warranting a spot in your portfolio.