1 Warren Buffett Stock That Could Go Parabolic in 2024 and Beyond

Warren Buffett’s portfolio includes a company that few investors have heard of. It’s one of the fastest-growing businesses Buffett has ever invested money in, and it’s a reasonable expectation that it will double in size in the next few years several times more.

Others may ignore the stock. But you shouldn’t.

Few companies can grow so fast for so long

Have you ever heard of Nu Holdings (NU 0.80%)‘There aren’t many investors. That’s because the company operates only in Latin America. And not all of Latin America. Nu first launched in Brazil about a decade ago and has only entered two other markets since then: Mexico and Colombia.’

What exactly is Nu doing in these target markets? It’s disrupting the entire banking sector. “What started as a mission to eliminate bureaucratic inefficiencies and high fees has evolved into one of the largest companies by market capitalization in Latin America, with about 100 million customers,” notes Quartr, a data analytics firm. “Nubank’s journey from disruptive startup to banking giant is an example of fintech’s power to transform industries.”

A decade ago, Latin America’s banking options were dominated by boring, traditional operators who used their market control to charge onerous fees for basic services. Nu conquered the market by offering its services directly through a user’s smartphone. It was easier, faster, and more affordable than any competitor. And Nu could innovate faster, too. When it launched its cryptocurrency trading platform, Nucripto, for example, it signed up more than a million users in its first month.

Nu’s business model has proven to be nearly perfect. Over the past decade, the company has gone from almost zero customers to over 100 million. And yet, the crazy growth rates continue. Nu added over 20 million customers last year, and revenue is up 65% year over year. More than half of all Brazilian adults are now Nu customers, and more than 80% of users consider themselves “active”—meaning they’ve used the service in the past month. The activity rate has actually increased over the past year, even as Nu has added millions of new customers—a sign that the company is maintaining its high-quality, on-demand offerings.

Image Source: Nu Investor Presentation.

While Nu initially focused on the hottest countries, Latin America is home to over 650 million people, and the company’s proven business model and growing reputation should help it sustain growth rates in the coming years. There’s even plenty of room to grow within its existing customer base. When customers first started signing up with Nu, they were using just one of its products on average. Today, the average new customer starts using three of Nu’s products from day one. For example, a new user might sign up for a bank account, but also a credit card and a cryptocurrency trading account. Selling more services to its current and future customer base adds another pillar of growth to Nu beyond growing gross customer accounts.

But are the shares worth buying? Absolutely.

Right now, Berkshire Hathaway — Warren Buffett’s holding company — owns nearly $1.4 billion worth of Nu stock. It hasn’t sold a single share since it acquired the holding.

At first glance, Nu stock isn’t cheap. It trades at 9.2 times sales and 44 times earnings. But the growth is so rapid that those numbers will soon look quite reasonable. Based on the forward forecast, that is, what analysts think the company will earn Next year — the stock is trading at just 4.5 times sales and 33 times earnings. That’s still expensive, but you can start to see how the stock could look like a bargain in just a few years.

Companies like Nu require patience. The growth rates are high, but the high entry price means investors need a multi-year investment horizon to see the most benefits. Buffett and Berkshire are clearly willing to be patient. Investors willing to take on extra risk in exchange for significant long-term growth should consider following suit.