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After a two-year bull market run, many US-listed shares now look overvalued. Nevertheless, there’s one development inventory that appears too good to go up, regardless of it rising 80% 12 months thus far.
Right here’s why I’m including it to my ISA.
A fintech large
The inventory in query is Nu Holdings (NYSE: NU). This can be a Brazilian fintech that operates Latin America’s largest digital financial institution (Nubank). The agency offers varied monetary providers by means of its mobile-first platform, together with no-fee banking, bank cards, loans, insurance coverage, and extra.
Extremely, Nu now has 105m clients, regardless of solely working in three international locations (Brazil, Colombia, and Mexico). Whereas up 80% 12 months thus far, the inventory, at $15, isn’t that a lot above the worth it went public at in late 2021.
What I search for
Like many buyers, I’ve a guidelines of traits I search for in a development firm earlier than investing a major quantity. Consider them as inexperienced flags or a set of necessities.
There are competing investing frameworks, and none function a magic method for locating profitable shares. However the six traits of rule-breaker shares set out by David Gardner, co-founder of The Motley Idiot, has helped me so much.
Right here they’re:
- Prime canine and first mover in an necessary, rising business
- Sustainable aggressive benefit
- Sturdy previous share value appreciation
- Good administration and good backing
- Sturdy shopper enchantment (branding)
- The inventory is taken into account ‘overvalued’ by the monetary media
Shopping for shares with these traits then holding them over the long run can produce great outcomes. Well-known rule-breaker shares embrace Amazon, Netflix, Nvidia, and Tesla.
Aggressive market
Now, I’m not saying Nu Holdings will emulate the efficiency of these shares (although I hope it does). I observe the agency’s market-cap is $71bn so it’s no minnow, and there are dangers.
One is that the branchless financial institution faces stiff competitors from the likes of MercadoLibre, PagSeguro, and Revolut. Whether or not Nubank’s aggressive benefit is actually sustainable isn’t apparent to me but.
Additionally, because it expands its credit score portfolio throughout Latin America, it may face an increase in non-performing loans. That might hit earnings.
Ticking bins
Nevertheless, the corporate possesses practically the entire traits listed above. It’s Latin America’s main digital financial institution (prime canine), and is using a smartphone/fintech growth by providing monetary merchandise to the tens of tens of millions of underbanked and unbanked folks throughout the area.
Income elevated from $1.7bn in 2021 to $8bn final 12 months! And it’s forecast to surge a lot greater.
The inventory is up 269% since January 2023 (robust value appreciation), and has been held by billionaire investor Warren Buffett’s Berkshire Hathaway (good backing) since 2021.
Nu’s co-founder is David Vélez, a former companion at enterprise capital agency Sequoia Capital. He has a deep understanding of Latin America’s distinctive monetary challenges and is dedicated to addressing them (good administration).
In the meantime, Nubank has constructed a powerful model and buyer loyalty in a market with traditionally poor banking experiences. The exponential development in clients speaks for itself.
Lastly, with a price-to-sales ratio of 10.1, the inventory could seem overvalued. The ahead price-to-earnings a number of is 25. However given the unbelievable development price, I reckon the inventory will find yourself seeming low cost at $15.
Nu Holdings ticks all my bins, so I’m shopping for some shares in November.
