Warren Buffett is rightly regarded as one of the greatest investors ever. His long-term track record of outperforming the S&P 500 by nearly double annually speaks for itself.
Therefore, it’s noteworthy that Buffett’s Berkshire Hathaway has been a net seller of stocks for eight straight quarters. Over this period, net sales have exceeded $150bn!
The most high-profile move by Berkshire has been a dramatic reduction in its mammoth stake in Apple. In the last quarter (Q3), this was cut by 25%, after a 49% reduction the quarter before.
Berkshire just sold this one too
I don’t own any Apple shares nowadays, but one Warren Buffett stock I bought back in October was Nu Holdings (NYSE: NU). This is the firm behind Nubank, the largest digital lender in Latin America.
However, regulatory filings show Berkshire sold 19.3% of its position in this Brazil-based fintech in Q3. This was the first time it had pared back its stake since investing nearly $1bn in the bank in 2021.
Why might this be? Well, we don’t know for sure, or whether it was even Buffett that made the decision or one of his investment lieutenants.
But the stock had nearly doubled in the 12 months to the end of September. So perhaps there was a bit of profit-taking going on.
Valuation may have been a concern too, as the trailing price-to-earnings (P/E) ratio has been well above 30 in recent months. Even after falling 25% since mid-November, the P/E ratio is 32.
So this isn’t a cheap stock, and Buffett and his team are generally value-oriented investors.
Finally, the macroeconomic backdrop in Brazil (Nubank’s largest market) has been a bit volatile. Inflation and interest rates have been rising, which creates challenges for both consumers and lenders.
This adds risk here, as the firm could face a rise in non-performing loans.
Should I sell too?
Nevertheless, the reasons I invested in this stock haven’t changed in two months.
In fact, they were strengthened by the company’s solid Q3. Revenue surged 56% on a foreign-exchange neutral basis to a record $2.9bn, beating Wall Street’s expectations for $2.6bn.
Meanwhile, adjusted net profit reached $592m, with an annualised adjusted return on equity of 33%.
This is one thing I like here. The firm is one of the fastest-growing digital services platforms worldwide, yet is already very profitable, with chunky margins.
It added 5.2m new customers during the quarter, bringing its total to 110m. This reflected a 23% year-on-year increase in customers.
Huge opportunity
I’m not worried about Berkshire’s reduction in Nu Holdings. In fact, I’m considering buying more of this growth stock after its 25% haircut.
The forward-looking P/E ratio is now just 20, falling to 15 by 2026. For a company growing revenue and earnings at a 50%+ clip, I reckon that’s dirt cheap.
Nu now has over 100m customers in Brazil (more than half the adult population!). Yet it appears to have significant room for expansion in Colombia and Mexico, let alone the rest of the region.
| Customers | Adult population (estimates) | Penetration rate | |
|---|---|---|---|
| Mexico | 8.9m | 98m | 9.1% |
| Colombia | 2m | 36m | 5.5% |
According to Latin America Reports, around 70% of the region’s population remains unbanked or underbanked (lacking access to basic services). Therefore, the long-term growth opportunity appears massive.
With the stock 25% cheaper than a month ago, I think it’s well worth considering.
