The market reacted favorably after the Federal Reserve’s June 11-12 meeting. The broader market marked record closes. At the June 12 press conference, Fed Chairman Jerome Powell emphasized the Fed’s focus on its dual mandate of achieving maximum employment and stable prices. While the labor market remains strong with continued job gains and low unemployment, inflation has decreased significantly from its peak but remains above the 2% target, currently at 2.7% and the Federal Open Market Committee (FOMC) believes it’s still high.
Key Developments
The Fed Chairman reported that GDP growth slowed from 3.4% in Q4 of 2023 to 1.3% in Q1 of 2024. However, underlying demand indicated by private domestic final purchases grew at 2.8%. Consumer spending has moderated but remains solid, and investment in equipment and intangibles has improved. Moreover, the labor market is balanced, with job gains averaging 218,000 per month in April and May, and the unemployment rate was at 4%. Inflation, as measured by PCE prices, rose 2.7% over the past year, while core PCE rose 2.8% and the CPI rose 3.3% in May, with the core CPI at 3.4%. Finally, the FOMC decided to keep the federal funds rate unchanged at 5.25% to 5.5% and to continue reducing securities holdings to manage inflation.
Powell emphasized a cautious approach to policy adjustments. The Chairman said that while some progress has been made toward the inflation target, more data is needed to ensure inflation is sustainably moving toward 2%. The Fed will continue to assess economic data and adjust policies as needed to support their dual mandate. He reiterated the commitment to restoring price stability to ensure long-term economic health. The Fed chair noted that the median projection for the federal funds rate by FOMC participants is 5.1% by the end of 2024 if the “economy evolves as expected.” Nevertheless, Jerome Powell highlighted that the projections are not a guarantee and will depend upon the data in the coming months.
The CME’s FedWatch tool reveals that 35.8% of the market expects the interest rates to remain the same in September, 59.2% expect a 25 basis points (bps) reduction, and 5% believe in a 50 bps rate cut. These numbers have risen significantly in favor of rate cuts since we reported them on May 31 in our article about the best up-and-coming stocks.
After a long wait, the Fed has finally hinted at potential rate cuts in September, which brings tons of opportunities in the market. Let’s take a look at some now.
10 Best Robinhood Stocks Under $20
Our Methodology
For this article, we used the app to identify over 100 stocks with a $2 billion market cap that were trading under $20, as of June 12. We narrowed down our list to the stocks with positive hedge fund sentiment, analyst ratings, and optimistic prospects and chose the 10 stocks with the highest number of institutional investors.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Robinhood Stocks Under $20
10. Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Holders: 37
Share Price as of June 12: $3.65
Grab Holdings Limited (NASDAQ:GRAB) is a Singapore-based company that provides Southeast Asia’s most dominant super-app through its Grab ecosystems for accessibility to mobility, delivery, and digital financial services.
In its latest quarter, Grab Holdings Limited (NASDAQ:GRAB) showcased an impressive performance with significant top-line growth and bottom-line adjusted EBITDA profitability. The company recorded its ninth consecutive quarter of adjusted EBITDA improvement, mainly credited to the strong consumer activity across Southeast Asia. It expanded its user base to a record high of 38 million monthly transacting users, with a noteworthy increase in order frequency for its on-demand services. Over the last three years, Grab Holdings Limited’s (NASDAQ:GRAB) revenue grew by 56.73% and its net losses have been decreasing significantly. Over the last 12 months, the company’s EPS has improved by nearly 81%. According to Yahoo Finance’s analyst poll, the company will reach a break-even point by the third quarter of 2024 and will yield positive earnings in 2025.
Grab Holdings Limited (NASDAQ:GRAB) dominates eight Southeast Asian countries. According to a Momentum Works report, the company accounts for 55% of the region’s total food delivery platforms gross merchandise value (GMV) and holds a bigger share in the ride-hailing market. WSJ reports that Grab Holdings Limited (NASDAQ:GRAB) covers 63.5% of Indonesia’s ride-hailing market and 47.8% of food delivery. While it is trading at a price-to-sales ratio of 5.8x, which doesn’t make it look cheap compared to its peer average of 1.6x, the company holds a prominent position in emerging markets where it is expected to grow further. Moreover, analysts expect the company to grow its sales by 18% in 2024.
Moreover, Grab Holdings Limited (NASDAQ:GRAB) is hedge funds’ favorite penny stock as 37 hedge funds held stakes in the company in the first quarter, with positions worth $612.785 million. As of the first quarter, Tiger Global Management LLC is the most prominent shareholder of the company. The firm increased its stake by 31% to 66.80 million shares worth nearly $210 million. In addition to hedge funds, analysts also keep a bullish view of the company. Based on the consensus of 25 analysts, Grab Holdings Limited (NASDAQ:GRAB) has a strong buy rating with an average analyst price target of $4.77, showing a 30.7% upside to current levels on June 12.
9. Blue Owl Capital Inc. (NYSE:OWL)
Number of Hedge Fund Holders: 40
Share Price as of June 12: $17.64
Blue Owl Capital Inc. (NYSE:OWL) is a New York-based asset manager that provides permanent capital base solutions, direct lending products, liquid credit, and GP strategic capital products, among others. Blue Owl Capital Inc. (NYSE:OWL) was held by 40 hedge funds in the first quarter and the stakes amounted to $443.136 million. Kinetic Partners Management is the top investor of the company and has a position worth $69.600 million, as of March 31.
Blue Owl Capital Inc. (NYSE:OWL) is one of the best Robinhood stocks under $20 as its assets under management (AUM) and revenues have consistently grown since it went public. In the first quarter of 2024, the company’s AUM grew by 21% year-over-year to $174.3 billion and its revenue was up over 31% at $513.34 million. Over the last three years, the company’s revenue has recorded a compound annual growth rate of 81.76%.
Blue Owl Capital Inc. (NYSE:OWL) has also shown strong fundraising capabilities recently. The firm successfully raised $5.2 billion for its latest triple net lease fund, which was the largest U.S.-focused real estate fund in 2023. The gross flows into perpetually distributed products In the wealth channel totaled $2.1 billion in Q1, up 16% year-over-year. On top of that, the firm closed $1.4 billion of institutional capital in its direct lending business, and its new mid-cap GP strategic capital strategy raised over $0.5 billion during the first quarter.
Blue Owl’s recent strategic acquisitions also provide a bull case for the firm. The firm acquired Kuvare Insurance Services for $750 million on April 3, 2024, adding $20 billion in AUM for Blue Owl Capital. The acquisition positions the firm to capitalize on the $20 trillion global life and annuity market by providing comprehensive insurance asset management solutions. On June 7, the firm made another acquisition to strengthen its capabilities in real estate lending. It acquired Prima Capital Advisers, adding another $10 billion to Blue Owl’s AUM.
Even though Blue Owl Capital Inc.’s (NYSE:OWL) seems very high (145x compared to the 20x industry average), the company is expected to grow its earnings significantly over the next couple of years. The company’s earnings are expected to grow by 575% in 2024 compared to the prior year and a further 26% in 2025.
Blue Owl Capital Inc. (NYSE:OWL) has a consensus buy rating among 12 analysts, and its average price target of $21.45 represents an upside of 21.6% from current levels, as of June 12.
8. Permian Resources Corporation (NYSE:PR)
Number of Hedge Fund Holders: 41
Share Price as of June 12: $15.58
Permian Resources Corporation (NYSE:PR) is a Texas-based independent oil and natural gas company that develops crude oil and related liquids-rich natural gas reserves. The company has assets in the Delaware Basin.
The bullish case for Permian Resources Corporation (NYSE:PR) is four-pronged. Starting with its strong balance with liquidity of over $2 billion and leverage of approximately 1x, meaning that the company’s total debt is roughly equal to its EBITDA as of the first quarter of the current year. In addition, the company’s credit facility saw aggregate lender commitments rise from $2 billion to $2.5 billion while maintaining a borrowing base of $4 billion. This financial strength enables the company to sustain its operations and fund future growth initiatives. Moreover, In Q1 2024, the company generated an adjusted operating cash flow of $844 million and an adjusted free cash flow of $324 million.
Permian Resources Corporation’s (NYSE:PR) second prong is its early integration of Earthstone Energy, Inc., which took place on November 1, 2023, and drove significant synergies. Permian Resources has already achieved $175 million per year in synergies and has an increased target of $225 million annually. The Earthstone acquisition was also responsible for efficiency gains, including an 18% reduction in Earthstone drilling days per well and a 50% reduction in completion days per well. In addition, analysts predict significant top and bottom-line growth for Permian Resources Corporation (NYSE:PR) in the near future. Based on consensus estimates of 16 analysts, the company is forecasted to post a non-GAAP EPS of $1.64 in 2024, up 32% year over year. The company is offering an attractive entry point as its trading at just 9 times its forward earnings, lower than the sector median of 11x.
Another factor that makes Permian Resources one of the best Robinhood stocks under $20 is its focus on shareholder returns. On May 7, the company announced a 20% increase in its quarterly dividend and the board also declared a quarterly variable cash dividend of $0.14 per share. Both dividends were paid out on May 29. In the first quarter, Permian Resources rewarded its shareholders by buying back 2.0 million shares of common stock for $31 million. Including the base dividend, variable dividend, and share repurchases, the total return on capital for the quarter amounted to $0.24 per share. As of June 12, the company has a dividend yield of 1.6% and a low payout ratio of 12.8%, which means that its free cash flows can easily sustain its dividends.
Finally, over the last three months, 13 Wall Street analysts have covered Permian Resources Corporation (NYSE:PR), and 11 keep a buy rating on the stock. The average price target of $20.77 represents an upside of 33.31% to the stock’s current price, as of June 12.
In the first quarter, 41 hedge funds held positions in Permian Resources Corporation (NYSE:PR) and their stakes amounted to $1.07 billion. This is compared to 35 funds’ positions in the previous quarter worth $945.008 million.
7. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 41
Share Price as of June 12: $12.08
Ford Motor Company (NYSE:F) is a Michigan-based company that is engaged in the development, delivery, and servicing of a range of trucks, commercial cars and vans, sport utility vehicles, and luxury vehicles. The company is one of the best Robinhood stocks under $20 and provides its vehicles under the Ford and Lincoln brands.
On June 4, Ford Motor Company (NYSE:F) announced its May sales figures with US vehicle sales increasing 11% from a year-ago period to 190,014 units. Electric vehicle sales were up 64.7% and hybrid vehicle sales grew by 64.5% to 8,966 and 17,631 vehicles, respectively.
Ford Motor Company (NYSE:F) is one of the most dominant players in its respective industry and it is one of the top 5 stocks Democrats and corporate Insiders are buying. The company has an impressive balance sheet with $25 billion in cash and close to $43 billion in liquidity. The recent renewal of $18 billion in corporate credit facilities further strengthens Ford Motor Company’s (NYSE:F) financial flexibility. On top of that, the company has a strong focus on shareholder returns. It is committed to returning 40% to 50% of adjusted free cash flow to shareholders, along with a regular quarterly dividend. As of June 12, the company has a dividend yield of 5.1%.
Ford Pro is one of the key growth drivers of Ford Motor Company (NYSE:F). In Q1, Ford Pro’s revenue surged by 36%, with a 21% increase in wholesales. The segment delivered an impressive EBIT of $3 billion, with a margin of 16.7%. This growth is fueled by increased production and a richer mix of Super Duty and Transit vehicles, along with higher net pricing. Additionally, software and physical services now contribute 13% to Ford Pro’s EBIT, with expectations to reach 20% in the coming years. This high-margin revenue stream shows Ford Pro’s long-term growth potential.
As of Q1, 41 hedge funds held stakes in Ford Motor Company (NYSE:F), with positions worth $1.54 billion. As of the first quarter, Fisher Asset Management is the biggest shareholder in the company and has a position worth $830.301 million.
6. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 42
Share Price as of June 12: $15.97
KE Holdings Inc. (NYSE:BEKE) is a China-based company that operates an integrated online and offline platform for housing transactions and services. The company offers its services through an integrated online and offline platform known as Beike, a real estate brokerage branded store Lianjia, an operating system Agent Cooperation Network, and more. In the first quarter, 42 hedge funds had stakes in KE Holdings Inc. (NYSE:BEKE), with total positions worth $1.35 billion. As of March 31, Hillhouse Capital Management is the most significant shareholder in the company with a stake worth $400.667 million.
KE Holdings Inc.’s (NYSE:BEKE) diversified revenue streams highlight its growth potential. The home renovation and furniture business surged by 71.1% year-over-year, with contracted sales reaching RMB 3.4 billion (1 RMB = US$0.1378) in Q1. This segment’s contribution to total revenue increased, reflecting the company’s ability to capitalize on cross-selling opportunities within its ecosystem. Additionally, the home rental services segment saw an 189.3% year-over-year revenue increase, driven by a significant rise in the number of managed rental units.
In 2023, KE Holdings Inc. (NYSE:BEKE) showed resilience and was one of the few companies that grew despite the challenging circumstances in the Chinese housing market. In spite of its challenges, the company still maintains its focus on shareholder returns. The company allocated around $790 million to share buybacks in 2023 and continued its repurchase program in 2024 with $344 million spent as of May.
On May 23, KE Holdings Inc. (NYSE:BEKE) reported first-quarter earnings. The non-GAAP EPADS was $0.16, which beat the market estimates by $0.05. The revenue generated during the quarter was $2.27 billion and topped the estimates by $60 million. On May 28, a few days after its earnings beat, Barclays analyst Jiong Shao raised KE Holdings Inc.’s (NYSE:BEKE) price target to $30 from $20. Shao highlighted the company’s Q1 earnings beat and guidance raise and noted strong progress in its new home renovation and rental businesses. Although existing and new homes saw expected year-over-year declines in gross transaction value, management reported that existing home transaction volume for April and the first three weeks of May increased by double digits compared to last year.
We think KE Holdings Inc. (NYSE:BEKE) might be an attractive idea to explore while it trades at a 52% discount to its sector median, at 15.5x its forward earnings (sector median = 32.7x). Analysts expect a 48% year-over-year growth in the company’s earnings by the end of this year.
5. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 43
Share Price as of June 12: $19.88
Kinder Morgan, Inc. (NYSE:KMI) is a Texas-based energy infrastructure company that runs through various segments, including Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. The company has an ownership interest or runs 79,000 miles of pipelines, 139 terminals, and 702 billion cubic feet of working natural gas storage capacity. Moreover, the company’s renewable natural gas generation capacity is nearly 6.1 billion cubic feet (Bcf) per year with an additional 0.8 Bcf in development.
Kinder Morgan, Inc. (NYSE:KMI) is one of the best Robinhood stocks under $20 as it provides healthy shareholder returns and has shown notable growth in recent years. As we discussed in our article about the best natural gas and oil dividend stocks, the company has a strong cash flow position, which makes its dividend payments secure. In April 2024, the company marked 7 consecutive years of dividend growth. It has a dividend yield of 5.82%, as of June 12.
With its investment-grade balance sheet, Kinder Morgan, Inc. (NYSE:KMI) plans to keep its dividend yield at 6% and focus on share repurchases. Since 2016, the company’s adjusted EPS has grown at a CAGR of 8%, leverage decreased by 26%, and it paid out over $20 billion in dividends and share repurchases as of Q1 2024.
Similar to utilities stocks, AI data centers also bring good news for energy infrastructure company, Kinder Morgan, Inc. (NYSE:KMI). The company is well-positioned to capitalize on the growing need for reliable and affordable energy. The company’s strategic focus on natural gas, along with the challenges of integrating renewables into the grid, emphasizes the importance of its assets in meeting future energy demands.
At a stake value of $1.146 billion, 43 hedge funds held positions in the stock in the first quarter. As of Q1, FPR Partners is the largest shareholder in the company and has a position worth $152.167 million.
4. The AES Corporation (NYSE:AES)
Number of Hedge Fund Holders: 45
Share Price as of June 12: $19.66
The AES Corporation (NYSE:AES) is a Virginia-based diversified power generation and utility company that provides its services through its subsidiaries, including Indianapolis Power and Light Company, AES Solutions Management, LLC, AES Laurel Mountain, and more. Hedge fund sentiment was positive toward The AES Corporation (NYSE:AES) in the first quarter as hedge funds with investments in the stock were 45 in the quarter, with positions worth $1.25 billion. This is compared to 35 funds with positions worth $913.071 million in the preceding quarter. Orbis Investment Management is the top investor in the company as of March 31 and holds a position worth $415.3 million.
The biggest growth catalyst for The AES Corporation (NYSE:AES) is its integration into AI. AES’s strategic positioning as a major energy provider to technology companies and data centers is noteworthy. With nearly 6 GW of long-term contracts directly with tech giants like Google, Microsoft, and Amazon, and an additional 500 MW with utilities for data center customers, AES is crucial in supporting the tech sector’s renewable energy commitments.
According to Goldman Sachs, the power demand in the US will rise at a compound annual growth rate of 2.4% between 2022 and 2030 and 0.9% of it will be accounted for by data centers, The AES Corporation (NYSE:AES) is well-positioned to meet this demand with its extensive renewable energy projects, particularly wind and solar, coupled with energy storage solutions. The company is expected to add 3.6 GW of new capacity in 2024, with 92% of the necessary major equipment on site. Including a 15-year contract with Amazon to add 1 GW of solar and storage, The AES Corporation’s (NYSE:AES) backlog of projects is now 12.7 GW.
According to analysts’ estimates, The AES Corporation (NYSE:AES) is expected to improve its profit margins in 2024 as its non-GAAP EPS is expected to grow from $1.76 per share in 2023 to $1.92 in 2024. AES is currently trading at 10 times its forward earnings. Considering the 16x peer average and also the fact that its earnings will grow by about 9% this year, AES is cheap at current levels.
On March 31, Argus raised the price target on The AES Corporation (NYSE:AES) to $28 from $25 and kept a buy rating.
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3. Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 56
Share Price as of June 12: $16.74
Carnival Corporation & plc (NYSE:CCL) provides leisure travel services and operates through NAA Cruise Operations, Europe Cruise Operations, Cruise Support, and Tour and Other segments. The company is one of the best Robinhood stocks under $20 and its portfolio of brands includes Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises, and Cunard.
On June 14, Cruise operators faced challenges as BofA forecasted lower pricing for June. BofA Securities indicated that prices in early June have fallen compared to the previous month. Consequently, share prices of all major cruise lines closed the day in red. However, the recent earnings of these cruise lines, including Carnival Corporation & plc (NYSE:CCL), show strength in the stocks. The company’s total customer deposits and occupancy are consistently increasing. In the first quarter of 2024, the company recorded first-quarter deposits at $7 billion, almost doubling the deposits in the first quarter of 2022. Moreover, in Q1 of 2022, the cruise line’s occupancy was at 54% and reached 102% in Q1 of 2024.
Carnival Corporation & plc’s (NYSE:CCL) sustainable revenue growth is supported by investments in new ships like Carnival Jubilee, Sun Princess, and Queen Anne, as well as the modernization of existing fleets, such as the AIDA evolution program. On June 12, the company’s Cunard line announced record-breaking bookings after the launch of its new 3,000 guest ship, Queen Anne. Moreover, exclusive destinations, such as Celebration Key, make a compelling case for the company to generate significant revenue growth and improve guest experiences, which could drive the demand for the company’s offerings further.
Based on 16 Wall Street analysts’ ratings in the last three months, Carnival Corporation & plc (NYSE:CCL) has a consensus rating of strong buy. The average price target of $22.00 implies an upside of 31.42% from the current levels, as of June 12. Furthermore, while the company is trading at a PE ratio of 52x. analysts estimate that the company will go from posting negative $0.06 EPS in 2023 to a nearly 1800% increase to $1.01 and a further 41% increase in 2025.
In Q1, 56 hedge funds held positions in Carnival Corporation & plc (NYSE:CCL) worth $1.5 billion. Point72 Asset Management has increased its stake in the company by 228% to 12.76 million shares worth $208.494 million and is the most significant shareholder as of the first quarter.
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2. Teva Pharmaceutical Industries Limited (NYSE:TEVA)
Number of Hedge Fund Holders: 58
Share Price as of June 12: $17.22
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is engaged in developing, manufacturing, marketing, and distributing generic medicines, specialty medicines, and biopharmaceutical products. The company’s portfolio has 3,600 medicines and more than 53 manufacturing facilities in over 33 countries.
In May 2023, Teva Pharmaceutical Industries Limited (NYSE:TEVA) launched its “Pivot to Growth” strategy which is showing signs of success in the company. On the Street, TEVA sports a consensus Moderate Buy recommendation and high price forecast of $22 represents a 28% upside to the current levels.
At its latest earnings call, Teva Pharmaceutical Industries Limited’s (NYSE:TEVA) management highlighted some of its innovation and pipeline advancements. The company’s long-acting Olanzapine for schizophrenia has met all primary and secondary endpoints, with significant potential due to the unmet need for long-acting treatments in this space. Additionally, the management said that the company’s anti-IL15 program targeting celiac disease is showing promise, with a potential market of 2 million patients in the U.S. alone. The early recruitment success and the rapid progression of these programs highlight Teva Pharmaceutical Industries Limited’s (NYSE:TEVA) ability to accelerate clinical development and bring new treatments to market efficiently.
Teva Pharmaceutical Industries Limited’s (NYSE:TEVA) entrance into the $33 billion biosimilars market also makes a bullish case for it. According to Mordor Intelligence, the biosimilars market is expected to be worth $35.47 billion in 2024 and grow to $82.27 billion by 2029 at a compound annual growth rate of 18.32%. On February 24, the company along with Alvotech (NASDAQ:ALVO) announced that the U.S. Food and Drug Administration (FDA) has approved their SIMLANDI (adalimumab-ryvk) injection as an interchangeable biosimilar to AbbVie Inc.’s (NYSE:ABBV) Humira, which was one the world’s top-grossing pharmaceutical products in 2023. SIMLANDI is authorized for the treatment of several conditions, including adult rheumatoid arthritis, juvenile idiopathic arthritis, adult psoriatic arthritis, adult ankylosing spondylitis, Crohn’s disease, adult ulcerative colitis, adult plaque psoriasis, adult hidradenitis suppurativa, and adult uveitis. On April 16, the FDA approved another one of the company’s biosimilars, SELARSDI (ustekinumab-aekn), which is used for the treatment of moderate to severe plaque psoriasis and for active psoriatic arthritis in adults and pediatric patients 6 years and older. It is a biosimilar to Janssen Biotech, Inc.’s STELARA.
Teva Pharmaceutical Industries Limited (NYSE:TEVA) was part of 58 funds’ portfolios and the total stake value was $2.04 billion in the first quarter. As of Q1, Slate Path Capital is the top shareholder in the company and has a position worth $379.505 million.
Sound Shore Management made the following comment about Teva Pharmaceutical Industries Limited (NYSE:TEVA) in its Q3 2023 investor letter:
“Away from power, drug maker Teva Pharmaceutical Industries Limited (NYSE:TEVA), a new holding, also performed well during the quarter. Teva develops, manufactures and markets generic and specialty drugs focused on neurological and respiratory diseases, as well as oncology. Following a period of poor capital allocation decisions in prior years, we were able to invest at a very attractive valuation. We now believe management has positioned the company for renewed growth, driven by its most promising branded drug pipeline in years. The investment is off to a good start and the stock gained after second-quarter results topped consensus.”
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1. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 63
Share Price as of June 12: $11.58
Nu Holdings Ltd. (NYSE:NU) is a Brazil-based company that offers a digital banking platform. The company’s various solutions include Nu credit and prepaid cards, mobile payment solutions, and an integrated mall called Nu Shopping, among others. The company is at the top of our best Robinhood stocks under $20.
In the first quarter, hedge fund sentiment was positive toward Nu Holdings Ltd. (NYSE:NU) and in the first quarter, 63 hedge funds held positions in the company and their stakes amounted to $5.564 billion. This is compared to 54 funds in the fourth quarter of 2023, with positions worth $4.538 billion. As of March 31, Warren Buffett’s Berkshire Hathaway is the most dominant shareholder in the company and has a position worth $1.28 billion.
In our previous article, we discussed the up-and-coming stock Nu Holdings Ltd. (NYSE:NU). The company showed strong customer acquisition and retention capabilities across its primary markets, particularly in Brazil and Mexico. As of Q1 2024, Nu reported a customer base of 99.3 million, representing a 26% year-over-year increase. Nu Holdings Ltd. (NYSE:NU) stands as a leading digital banking platform in Latin America, with notable growth in Mexico, where the customer base surged by 106% year-over-year to 6.6 million.
In addition to customer growth, Nu Holdings Ltd. has reached significant financial milestones. For Q1 2024, the company reported revenues of $2.7 billion, marking a 66.7% increase compared to the previous year. This revenue growth was driven by a 30% year-over-year rise in average revenue per active customer, which climbed to $11.4. The company operates efficiently, maintaining a low cost-to-serve per active customer at $0.90.
Nu Holdings Ltd.’s (NYSE:NU) earnings have been improving consistently and according to analyst consensus, it is expected to report an EPS of $0.42 in 2024, up 100% from its FY 2023 numbers. Moreover, even after exceeding 100 million customers, the company has significant room to grow and showing promising results in Mexico. The company’s growth in Mexico is outpacing its performance in Brazil at a similar stage, with significant milestones in customer acquisition and market share. For instance, Nu Mexico has already achieved $1.6 billion in credit card purchase volume, representing a 6.1% market share, compared to 4.3% in Brazil at the same period. Additionally, Nu Mexico has accumulated $2.3 billion in retail deposits, more than doubling from the end of 2023 and representing a 1.2% share of total deposits in Mexico.
Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets. “
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While we acknowledge the potential of Nu Holdings Ltd. (NYSE:NU) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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