Nubank (NU) is a Brazilian fintech and Warren Buffett holding that may prove itself as a great value pick. The Oracle of Omaha’s Berkshire Hathaway (BRKB) purchased a $500 million stake just before its 2021 initial public offering and has now raised its investment to a whopping $1 billion. NU ADR shares are listed on the NYSE and currently hold a $3.6 billion market capitalization.
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The fintech also has innovation investor Cathie Wood’s support. The ARK Fintech Innovation Fund (ARKF) bought 500,000 shares in December 2021 and has increased its position to 3 million shares.
Both investors follow radically-different investment strategies but they both hold stocks for the long term. Buffett can hang on for decades while Cathie Wood’s ARK looks at a five-year investment horizon.
But while Buffett the value investor wants strong balance sheets, Wood the innovation investor wants disruptions that transform and change life.
Fintech Bank To Issue Cryptocurrency
The digital bank is making strides with cryptocurrencies.
It first offered crypto trading in July 2021 and will release Nucoin, its own cryptocurrency, in 2023. Rio de Janeiro is likely to accept property tax payments in crypto around the same time, offering an opportunity for Nubank to tap into a potent market. It has already ventured into crypto trading for Bitcoin and Ethereum on the Nucripto trading platform.
Nucoin will operate on a blockchain with far-reaching ramifications, including decentralized apps. The fintech will run the coin on Polygon’s network, which utilizes the Ethereum blockchain and seeks to reduce transaction time and costs.
Nubank is the largest digital bank in Brazil by market capitalization. Its no-fees credit card and digital banking have been gaining customers since 2018, growing its base to over 65 million in the second quarter. This is roughly 35% of Brazil’s adult population.
Digital Finance Gains Traction During Crypto Winter
Earlier, JP Morgan Chase (JPM) became the first bank to offer its own stable coin, launching the JPMCoin.
Nucoin is not pegged to the US dollar, unlike JPMCoin. It will initially be a loyalty rewards program but may become a tradable coin in the future.
Mastercard (MA) already offers CryptoSecure to help customers track crypto activity. Digital payment providers like PayPal (PYPL) and Robinhood also allow crypto payments.
Goldman Sachs (GS) was one of the first big Wall Street firms to offer a crypto derivatives trading desk for Bitcoin futures and non-deliverable forwards, under its Global Currencies and Emerging Markets.
In 2018, Buffett’s Berkshire purchased an 8% stake in StoneCo, another Brazilian fintech. The 14 million shares purchased during the IPO are still in the long-term investor’s portfolio.
StoneCo currently holds an $8 billion valuation and is one of the largest payment processors in Brazil.
In August, LatAm fintech and e-commerce giant MercadoLibre (MELI) issued its own coin, now available for trading.
Nubank’s Earnings
NU shares have been beaten down this year but the bank raised an additional $650 million credit line in April. Revenue has grown to $1.2 billion — a 230% increase as it taps into the 650 million-plus Latin American population. As of June 30, it had a strong cash position representing 79% of adjusted capital.
Nubank offers no-fee digital banking that counters the exorbitant charges of traditional Brazilian banks. Nucoin and the Polygon platform should continue to support this emerging value story.
The fintech’s ultimate value lies in its disruption, attractive to investors seeking to stay ahead of the digital asset curve.
Follow Vidya Ramakrishnan on Twitter @IBD_Vidya for updates on blockchain and cryptocurrencies, fintech, artificial intelligence and cloud technologies
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