We recently compiled a list of the 10 Best Fintech Stocks To Buy in 2024. In this article, we are going to take a look at where Nu Holdings Ltd. (NYSE:NU) stands against the other fintech stocks.
A Breakdown of the Global Fintech Industry
Based on a collaboration between the World Economic Forum and the Cambridge Centre for Alternative Finance, a report revealed that the global fintech industry has been strong post-pandemic with the average global customer growth rates above 50% from 2021 to 2022. In this growing market, fintechs are bringing tailored financial services and products to underserved segments of the population. These segments make up a sizeable portion of the consumer base of fintech firms operating in both advanced economies and in emerging markets and developing economies.
For the second year in a row as reported by CNBC, payments serve as the largest individual industry segment with a 24% share, although it is really fragmented with many firms moving money across the globe. Alternate finance which encompasses crowd-funding apps and online lenders follows with a 16% share. Other segments and their relative shares include 14% of neo-banking, 12% of wealth technology, 10% of business process solutions, 10% of banking solutions, 8% of financial planning, and 6% of digital assets. Country-wise, the US serves as the single biggest fintech market which hosts 46% of the top 250 fintech companies. Meanwhile, the UK hosts 12% while India is home to 4% of these companies. India has replaced both Germany and France due to its rapidly increasing digital adoption.
Current Landscape for Fintechs
In the prevailing industry landscape, fintech companies that are on the lower end appear to be better off. Previously, Bank of America’s CEO mentioned the consumer to be very stable and not getting worse. On the contrary, JP Morgan Chase COO Daniel Pinto warned that net interest income is going to be challenging next year with the expected Fed rate cuts just on the horizon. Ally Financial CFO talked about worse conditions as its borrowers are facing job market weakness as an increasing concern other than inflation.
In an interview with CNBC, Dan Dolev, senior analyst in fintech equity research at Mizuho, emphasized the rising consumer credit concerns. In his opinion, the fintech players with more exposure to the lower income consumers are doing better. He mentioned that low-end consumers had a lot of steamy money that they spent beyond their means. These consumers have pulled back on their spending to pay back their loans after depleting their savings 6 or 12 months ago. Meanwhile, the prime consumers are now facing the same pressure subprime consumers faced several months ago.
Our Methodology:
In order to compile a list of the 10 best fintech stocks to buy in 2024, we first used stock screeners and relevant ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best fintech stocks to buy in 2024 have been arranged in ascending order of their hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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: 59
The Brazilian fintech company Nu Holdings Ltd. (NYSE:NU) works as the world’s biggest digital banking platform outside of Asia. The company serves more than 105 million customers across Brazil, Mexico, and Colombia. By number of customers, Nu serves as the fourth-largest financial institution in Latin America. The firm promotes financial access and caters to the complete financial journey of customers.
With its pace of customer growth exceeding expectations, Nu Holdings Ltd. (NYSE:NU) continues to be a rapidly expanding platform. For the fiscal second quarter of the year, Nu added 5.2 million new customers, 20.8 million year-over-year, while the activity rate climbed to a new record high of 83.4%. The firm has successfully become the institution with the largest number of active customers in credit operations. Simultaneously, revenues climbed 65% year-over-year to a record high of $2.8 billion. The regional footprint also remains strong with Nu being the primary banking account for 60% of monthly active customers in Brazil, growing deposit yields in Mexico, and crossing the 1 million customer mark in Colombia.
Other than driving strong customer acquisition, Nu’s business model fuels its multi-product growth. The core products including credit cards, digital accounts, and unsecured lending have almost 42 million, 78 million, and 9 million active customers respectively. Investments are used by over 18 million users while the company’s insurance product has 2 million active policies.
With the position of one of the best-capitalized players in the region, expanding customer base, success in introducing relevant new products, and robust top-line growth, Nu Holdings Ltd. (NYSE:NU) ranks among the 10 best fintech stocks to buy in 2024. As of Q2, the stock is held by 59 hedge funds while Berkshire Hathaway is the most prominent shareholder in the company.
Overall NU ranks 10th on our list of the best fintech stocks to buy. While we acknowledge the potential of NU as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
