We recently compiled a list of the 10 Best Robinhood Stocks Under $20. In this article, we are going to take a look at where Nu Holdings Ltd. (NYSE:NU) stands against the other Robinhood stocks.
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.
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).
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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. “
Overall NU ranks 1st on our list of the best Robinhood stocks to buy. You can visit 10 Best Robinhood Stocks Under $20 to see the other Robinhood stocks that are on hedge funds’ radar. While we acknowledge the potential of NU as an investment, 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 NU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.