Buy shares of Warren Buffett's recommended stock in abundance during January
Warren Buffett, often labeled as a value investor, proves his versatility by amassing a substantial $1.2 billion stake in a company many would categorize as a hyper-growth tech giant—Nu Holdings. Buffett's investment strategy is centered around seeking discounted opportunities for future valuation, even if it means paying a premium today.
Nu Holdings, a fintech company, excels in the fast-growing tech sector while capitalizing on the vast addressable markets in finance. Its primary operations span various Latin American countries, and the company has surpassed 100 million active users in the last decade. The company's continued expansion and expansion into new markets, like the UK and US, suggest that its growth trajectory still has miles to go.
Buffett's affinity for long-term holding periods finds an ideal match with Nu Holdings, a company with the potential for years, if not decades, of growth. Nu Holdings' model revolves around offering financial services through mobile devices, shedding the costs associated with physical branches. Moreover, with fewer barriers to entry, Nu Holdings has introduced new financial services at the click of a button, promoting easy business expansion.
Recent market fluctuations have taken a toll on Nu's stock price, pushing it down to around $12 per share - equal to its 2021 price. However, analysts expect Nu Holdings to expand its sales by around 31% this fiscal year, albeit at a lower growth rate compared to past trends. The company’s strong revenue growth and recent profitability make this valuation look relatively low, which may pave the way for long-term growth.
In fact, while Berkshire Hathaway trimmed its stake in Nu by 19.3% last quarter, Buffet's company remains a substantial holder of the stock, with $1.2 billion still invested. This indicates that Buffett may still see significant potential for growth in this company. As an investor looking to emulate Buffett's approach, Nu Holdings is an intriguing opportunity for growth investors with a multi-year time horizon.
Nu Holdings' investment in finance and technology has attracted Buffett's interest in investing, given the company's potential for long-term growth. The discounted valuation of Nu Holdings' stock, despite its 31% expected sales growth this fiscal year, presents an opportunity for value-oriented investors like Buffett.
