Nu Holdings (NU 2.30%) has been an incredible stock over the past few years, and it’s no surprise that several billionaire fund managers own it. What might be surprising is the breadth of investors who have bought it. It appeals to both Warren Buffett and Cathie Wood, two investors whose investing styles are like night and day, and whose only other stock in common is Amazon.
But is its growth streak over? Buffett’s Berkshire Hathaway just sold 19% of its stake in Nu, or more than 20 million shares. It now accounts for just 0.4% of the total Berkshire Hathaway portfolio. Famed investment manager Israel Englander of Millennium Management sold shares as well, and nearly his entire position: 99%.
Do they know something the market doesn’t know? I don’t think so. I’ll explain why I think they sold and why Nu is still a top stock for many investors, and I’ll also tell you which billionaire managers just took a position in it.
What’s happening at Nu
The stock has had an incredible run, and it’s up more than 200% over the past two years. It has a disruptive digital business in its online financial services, and it’s shaking up the traditional banking system in its home country of Brazil.
Although it demonstrated strong results in the 2024 third quarter, they were a bit of a slowdown from previous quarters. Revenue increased 56% on a currency-neutral basis, and net income more than doubled to $553 million. Average revenue per active customer (ARPAC) increased 25% year over year on a currency-neutral basis, but was down sequentially over the past two quarters on a reported basis. Net interest income increased 63% over last year, but net interest margin narrowed year over year and sequentially.
Nu added 5.2 million members for a total of 109.7 million. It has continued momentum in Brazil, where 1.1 million new members joined the platform each month, and the company added 1.2 million members in Mexico for a total of 8.9 million in that country. It also surpassed 2 million in Colombia.
It was a good quarter objectively, but the market is never objective. The market also factors in valuation, so whereas it could carry a higher valuation with astronomical increases in those financial results, it can’t carry the same premium with lower increases.
Another reason the market is concerned is that Brazil just hiked interest rates again. Unlike in the U.S., where inflation seems to be cooling and the Federal Reserve is cutting interest rates, inflation is still rampant in Brazil, and interest rates were just raised. There’s worry about how that will affect Nu’s business as a bank in the near term.
But investors shouldn’t misunderstand: Nu’s business is booming, and it has a massive opportunity.
Why some billionaires sold
To begin with, we don’t know why any fund manager buys or sells a stock unless they tell us. If they don’t, we can only guess about intentions.
Nu is far from the typical Buffett stock. It’s a young fintech, and it has grown at a much faster pace than the usual Buffett stock recently. While the average investor might find that delightful, there are at least two possible reasons that Buffett might have cut his position. One is that Nu has always been meant to be a small piece. Since it’s not a typical Buffett bet, now that it’s ballooned in size, it might be accounting for more than he wants to allot for this kind of stock.
Englander runs an entirely different kind of operation, and the moves his fund makes offer less insight than a Buffett move. Millennium owns about 6,000 stocks, and it has various managers working on teams to trade stocks in a day-trading style. It was a net seller of Nu in the quarter, probably based on short-term analysis, but it could do a complete turnaround at any given time in the future.
These are the billionaires who bought
There’s rarely a consensus about whether or not to buy a stock at any given time, and even if there is, some of the most successful billionaire investors got where they are by being the contrarian. Every manager has a personal style and investing method, and they are almost always going to be different from the average investor’s.
Consider two other highly successful billionaire investors who opened new positions in Nu stock in the third quarter: Ken Fisher of Fisher Investments bought more than 7 million shares, and Paul Tudor Jones of Tudor Investment took a smaller position with 100,000 shares.
What should you do? If you have a long time horizon and are looking for a great growth stock, you can buy Nu stock right now. There may be some short-term pressure, and you should never expect linear gains. Nu didn’t plummet, because the investment thesis is strong. You can view the drop as an opportunity to buy on the dip.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in Nu Holdings. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.