The billionaire Israeli Englishman tripled his investment in the stock, which is also owned by Warren Buffett and Cathy Wood.

Billionaire money managers often take surprisingly different approaches to investing. Consider the holding company Warren Buffett. Berkshire HathawayIsrael Englander, the head of Millenium Management, owns thousands of stocks, although he only owns about 45 stocks at any given time. Add someone like Cathie Wood, who runs investment firm Ark Invest and buys disruptive technology stocks for Ark’s exchange-traded fund (ETF), to the mix, and you have three investing mindsets.

What do they all have in common? They all own it. Amazon These are stocks you don’t need to think about for every portfolio, and they all own young startups. Now Holdings (no -4.97%) inventory.

Buffett or someone on his team first recognized Nu’s potential when he invested $500 million in the company before it went public in 2021. Nu currently owns 107,118,784 shares, or 2.2% of the company, but represents a tiny 0.5% of Berkshire. Hathaway’s stock portfolio. Cathie Wood owns 1,238,918 shares as part of Ark. Fintech Innovation ETFIt accounts for 2.1% of the portfolio. Millennium owns 39,192,266 shares of Nu’s stock, a 371% increase in his position from the last quarter.

Let’s take a look at why three very different money managers are all excited about this growth stock.

Disrupting traditional banking in a huge market

Nu is a fully digital bank based in Brazil. It has recently expanded into Mexico and Colombia, but is still a small company. We are growing rapidly in every way, and have been reporting amazing results every quarter since listing.

In the second quarter of 2024, it added 5.2 million customers, reaching a total of 104.5 million. Most of them are still in Brazil, where 95.5 million people live, more than half of the adult population. When Nu first launched just over a decade ago, it was a challenger offering a simple, easy-to-use alternative to the rigid banking services offered by a few large traditional banks. Before the advent of Nu, banking was so complex and expensive that a significant portion of the population did not even have bank accounts. Because Nu is built to be flexible and agile, it has an advantage over traditional banks and customers are flocking to its platform. This is what Buffett likes.

This leaves about 9 million customers in the other two markets, 7.8 million of them in Mexico, where Nu’s performance has already surpassed its performance in Brazil at a similar stage of growth. We added 1.2 million customers in Mexico in the second quarter, a 15% increase from the previous quarter.

It’s not hard to imagine how this will impact revenue and scale. Second quarter revenue was up 65% year-over-year, which is a typical increase, but membership growth is only half the story. The other half is that members continue to use more services on the Nu platform, resulting in higher revenue per user and higher overall revenue growth. This is a strong signal of consumer satisfaction and long-term potential. Average revenue per active user in the second quarter increased 30% year over year.

Big size, big profits

Nu, like many initial public offering (IPO) stocks, was a riskier play when it went public because it did not have net income on a generally accepted accounting principles (GAAP) basis. However, it has reported GAAP net income for six consecutive quarters and is showing phenomenal growth.

It has operating leverage as a fully digital bank that skips expensive real estate and relies on technology instead of human interaction. Service costs have remained relatively stable despite growth. Net interest income in the second quarter increased 77% compared to the same period last year, and margins expanded from 18.3% to 19.8%.

Image source: Nu Holdings.

stealing a deal

As you can imagine, Nu stock is on a high and has nearly doubled over the past year. At current prices, it trades for a one-year forward price-to-earnings (P/E) ratio of less than 26, which looks cheap compared to other growth stocks. Amazon, another stock owned by these three money managers, trades with a forward P/E of 32.

The billionaires who bought Nu stock are onto something here. Although I often warn investors to follow billionaire stock pickers into their institutional holdings, Nu appears to be a clear winner for growth-oriented investors.