Spotlight: Top Growth Stock In Berkshire Portfolio

Hot growth stocks are something you associate with Cathie Wood a lot more so than Warren Buffett but the Oracle of Omaha has a few tricks up his sleeve yet to surprise even his most eagle-eyed fans.

One stock in his portfolio is up by over 140% this year, turning every $10,000 invested in it to $24,000. Or in Buffett’s case about $323 million into $776 million. So, what’s the stock and is it worth buying?

Key Points

• Nu Holdings has 80 million users and has been growing by over 100% YoY each quarter.
• Net income is set to rise this year and yet it’s still trading at a low PE ratio relative to forward growth.
• The share price is up significantly from a year ago but analysts still forecast more upside.

80 Million Reasons To Buy Latin American Fintech Firm

In Europe, a firm called Revolut has absolutely smashed its competition. While it’s not widely known in the United States, Revolut is THE go-to fintech app for consumers who want to travel abroad and pay no forex fees, a common problem for Europeans who can fly within a couple of hours to numerous destinations that don’t transact in the euro, and they can send money to each other simply much like Venmo facilitates in the US.

At last count, Revolut had approximately 28 million users but that number is dwarfed by a Latin American firm that has a similar business model and features 80 million users. The growth of Nu Holdings has been astronomical, so much so that you have to go back a few years just to find two consecutive quarters where the firm failed to post YoY quarterly growth above 100%.

Make no bones about it, management has been absolutely crushing it, posting jaw-dropping top line figures as well as turning the bottom line around from a loss a couple of years ago to massive profits in the most recent quarter. Looking out to the future we can easily see a time when Nu Holdings, now a bank also called NuBank, produces over $1 billion in quarterly operating income.

Is Nu a Buy?

On the one hand, you might argue if it’s good enough for Buffett and Berkshire Hathaway it’s good enough for the rest of us but timing is key and Nu Holdings has already gone on a serious run higher.

The question is whether there’s much gas left in the tank after its impressive run. According to analysts, the answer is definitively yes. The consensus estimate among analysts is that Nu Holdings can continue higher by another 15% or so to $10 and change per share.

While price-to-earnings and price-to-sales ratios are elevated now, they are not so high relative to forward-looking earnings as to make investors shy away altogether from the opportunity.

No doubt, the risks are higher now than they were a year ago before the stock accelerated higher but the future remains very attractive, and if it can sustain anywhere close to its triple-digit percentage growth levels, it will very likely be a winner for years to come.