1 Cathie Wood and Warren Buffett Stock That Could Go Parabolic in 2025

Cathie Wood and Warren Buffett stand as two investors with contrasting styles. While Wood is known for her focus on emerging trends like artificial intelligence and genomics, Buffett has built his legacy by investing in established blue-chip companies. Interestingly, both of these financial giants share a common investment in a rising fintech firm that is still relatively unknown among the general public.

This firm is called Nu Holdings (NU), which operates within the fintech sector, focusing mainly on Latin America. Given the increasing prominence of digital finance, Nu could offer great potential for investors.

Nu's Strong Performance

Nu is a digital financial services platform offering various products, including checking and savings accounts, investment options, and loan services. Historically, the company's primary markets have included Brazil, Colombia, and Mexico.

In December, Nu announced its participation in an investment round for the digital banking platform Tyme Group, which serves 15 million customers in South Africa and the Philippines. This expansion signifies Nu's commitment to growing its customer base.

By the end of the third quarter, Nu reported having 110 million members on its platform, indicating a year-over-year growth of 23%. Additionally, the company's average revenue per user (ARPU) saw a slight increase, standing at $11 per member.

This growth has allowed Nu to improve its profit margins. In the third quarter, the company's gross margin increased by 300 basis points, while net income soared by 83% compared to the same period last year, reaching $553 million. These metrics show that Nu is not just growing but doing so sustainably.

Attractive Valuation Amid Growth

When examining its valuation, Nu's price-to-sales (P/S) ratio places it in the middle of its peer group in the international fintech sector. While this relative valuation may indicate attractiveness, what stands out is the downward trend of Nu's P/S ratio in recent months. This decline largely reflects macroeconomic challenges in Brazil and other Latin American markets.

Despite these economic concerns, there may be valid reasons for long-term investors to hold onto their shares of Nu. The company's fundamentals remain promising, which suggests that it could emerge stronger as economic conditions improve.

Possible Comparisons with SoFi

A similar fintech company that has faced its own challenges is SoFi, which also provides basic financial services via a mobile app. Like Nu, SoFi's primary revenue comes from lending services. However, the recent economic climate in the U.S., characterized by rising interest rates, impacted SoFi's operations.

In recent months, the economic landscape has begun to stabilize, leading to a resurgence in SoFi's lending business. Following the first Federal Reserve interest rate cut in mid-September, SoFi's shares experienced an increase of more than 80%.

Just like SoFi, Nu is currently facing economic uncertainties, particularly in Brazil. However, it is essential for investors to adopt a long-term perspective. With Nu's growing user base, rising profits, and potential expansion, the company appears well-positioned for future success.

In my view, despite short-term challenges, Nu's long-term outlook remains favorable. Investors looking for opportunity may find Nu a compelling option.

Disclosure: The author has positions in SoFi Technologies. The analysis does not constitute financial advice.

Investing, Fintech, Stocks