Corporations able to hypergrowth often see their stock prices bid as much as outrageous levels. Often, nevertheless, shares remain a bargain in comparison with their long-term potential. Those willing to stomach the high upfront premium will be heavily rewarded if they continue to be patient.
Even after rising greater than 100% since I first identified how low-cost the shares were, my favorite hypergrowth stock still looks like a bargain in comparison with its long run potential. Let’s take a better look.
Start Your Mornings Smarter! Get up with Breakfast news in your inbox every market day. Sign Up For Free »
Because the 12 months began, I have been writing regularly about Nu Holdings (NYSE: NU). Warren Buffett purchased shares for this holding company when the corporate went public in 2021, and I noticed he had lost a whole lot of hundreds of thousands of dollars on this investment through the years that followed. On the time of Nu’s initial public offering (IPO), shares traded at roughly $10. One 12 months after the IPO, they were valued at lower than $5.
Buffett is not often improper about firms, so I made a decision to take a better look. What I discovered amazed me. Not only was Nu one among the fastest-growing firms I’d checked out in years, but its potential growth trajectory was truly impressive.
Let’s back up a bit to review what exactly Nu does. Many readers have never heard of the corporate before today, and for good reason — Nu operates exclusively in Brazil, Mexico, and Colombia. So unless you reside in one among those countries, or simply happened to have come across Nu in your stock investment research, it’s likely little or no about this amazing business.
At its core, Nu is a fintech company. Meaning it operates within the financial sector, known for its massive addressable markets — but in addition that it, if truth be told, operates more like a technology company, able to growth rates most financial businesses can be enviable of.
When the corporate was founded in 2016, its primary goal was to disrupt Latin America’s old-school banking industry. On the time, the financial sector was dominated by a handful of incumbent banks operating out of physical branches. Nu turned the industry the wrong way up by offering its services directly through a smartphone. This approach allowed it to scale rapidly, pushing latest financial services to customers on the touch of a button while reducing overhead costs, with a part of those savings passed along to its customers.
Nu’s growth has been impressive. Over the past decade, it has gone from essentially zero customers to greater than 100 million. Greater than half of all Brazilian adults at the moment are Nu customers. The corporate’s growth runway in Mexico and Colombia is for much longer than in Brazil, Nu’s first and oldest market. And with greater than 650 million residents living across greater than a dozen other Latin American countries, Nu’s long-term growth is probably going just getting began.