We recently compiled a list of the 10 best performing Warren Buffett stocks in 2024. In this article, we are going to take a look at where Nu Holdings Ltd. (NYSE:NU) stands against the other Top-Performing Warren Buffett Stock of 2024.
Warren Buffett has etched his name as the most successful investor on Wall Street by steering a small company into a trillion-dollar empire. The milestone stems from the billionaire investor’s value investing strategy that has always focused on undervalued stocks with tremendous upside potential.
In a year where the overall market has been on an upward trajectory thanks to solid financial results amid a resilient economy and expectations of interest rate cuts, Buffett has outperformed the overall market. His investment firm gaining more than 28% compared to a 17% gain for the S&P 500 over the same period underscores Buffett’s competitive edge in picking and investing in market-beating stocks.
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Buffett, who rose to prominence in the 1960s, has transformed his investment firm into a conglomerate with stakes in companies in the insurance, railroad, retail, manufacturing, and energy sectors. According to Andrew Kligerman, TD Cowen’s Berkshire analyst, Buffett’s performance in 2024 is a testament to his stock-picking skills focused on businesses trading at relatively lower valuations.
Nevertheless, the billionaire investor has been in defensive mode despite the stellar performance for the better part of 2024. Concerned by valuations getting out of hand amid the high interest rate environment and deteriorating economic conditions, Buffett has dumped massive amounts of stocks in companies whose valuations got out of hand.
With the massive sale of stakes, the billionaire has successfully generated significant value as most of the stocks had gained significantly amid the bull run in the market. The stock sale has also allowed the billionaire investor to raise the cash pile in his investment firm to a record $277 billion.
Although Buffett has previously argued against diversification, it’s understandable why his firm decided to reduce stakes in some of the companies. The investments had been a huge success for his firm, locking profits with the overall market at all-time highs.
The fact that Buffett invests through a conglomerate structure, often considered archaic, underscores his edge in the highly competitive investment world. At 94, the ‘Oracle of Omaha’ has started showing signs of slowing down. The appointment of Greg Abel as his successor signals he may not have a significant say in investment decisions in the near future.
What might come as a surprise is that the best-performing Warren Buffett stocks in 2024 are not among the big names that account for the biggest share of Buffett’s portfolio. Instead, they are companies that have remained resilient amid the high interest rate environment that has rattled the stock market.
Additionally, they boast of stocks well positioned to benefit as the macroeconomic environment improves, with the US Federal Reserve cutting interest rates by 50 basis points. The US economy is avoiding recession as the Fed continues to tweak its monetary policy, which should allow the companies to generate more shareholder value and, therefore, continue powering high.
Buffett’s investment portfolio also includes companies with tremendous potential and ability to generate free cash flow owing to resilient core businesses. Consequently, the companies have emerged as a source of passive income, allowing Buffett to generate billions of dollars in dividends. Last year alone, the Oracle of Omaha raked $4.36 billion in dividends from his investments.
Our Methodology
We analyzed Berkshire Hathaway’s Q2 2024 portfolio and picked the best-performing stocks on a year-to-date basis, as of September 20. The list is sorted in ascending order of the year-to-date performance of the stocks.
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).
Nu Holdings Ltd. (NYSE:NU)
Warren Buffett’s Q2 2024 Stake: $1.38 Billion
Year to Date Gain as of September 20: 82.04%
Number of Hedge Fund Investors In Q2 2024: 59
Nu Holdings Ltd. (NYSE:NU) is a financial services company that provides a digital banking platform in Latin America and Europe. It offers financial solutions, including Nu credit and prepaid card, a technologically advanced card that serves as both a credit card and a prepaid card.
Nu Holdings Ltd. (NYSE:NU) is the best-performing Warren Buffet stock in 2024, up 82.04%, due to its strong business model with a well-established brand, efficient cost structure, and effective monetization strategies.
The company’s competitive edge in the highly competitive financial services sector stems from its ability to attract and keep customers with minimal marketing spend. Concentrating on populations that are currently overlooked or not yet reached. It builds a devoted customer following naturally, cutting down on the need for expensive advertising efforts.
This shift means more of its earnings can be put back into expanding the business instead of being used to attract new clients. The lean and expandable framework of Nu’s approach makes it highly efficient in serving active customers. Reduced expenses lead to greater profit margins and improved financial stability over time. This expandability also lets Nu Holdings Ltd. (NYSE:NU) grew without the need for significant investments in facilities or staff, allowing Nu Holdings to prioritize customer satisfaction and growth.
The company’s Q2 2024 financial results underscore the growth trajectory as revenues increased 52% to $2.85 billion and earnings doubled to $0.12 per share. Throughout the quarter, Nu Holdings Ltd. (NYSE:NU) gained 5.7 million new customers, reaching a worldwide total of 105 million. This upward trend in digitalization is anticipated to propel NU Holding’s growth even more.
As of the second quarter of 2024, 59 hedge funds were bullish on Nu Holdings Ltd. (NYSE:NU), a decrease from 63 during Q1. Warren Buffett’s Berkshire Hathaway is the most significant shareholder of the company, with stakes worth $1.38 billion.
Baron Funds mentioned Nu Holdings Ltd. (NYSE:NU) in its Q2 2024 investor letter. Here is what the firm said:
“Nu Holdings Ltd. 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 10 best performing Warren Buffett stocks in 2024. 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, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
