Fintech Leader Nubank: Warren Buffett Value Stock and Cathie Woods Daring Innovator?

Nubank (NU) is a Brazilian fintech and Warren Buffett team that could prove to be a value pick. Oracle of Omaha’s Berkshire Hathaway (BRKB) bought a stake of 500 million dollars just before the IPO in 2021 and has now raised the investment to a whopping 1 billion dollars. NU ADR shares are listed on the NYSE and currently have a market capitalization of $3.6 billion.

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Fintech also has innovation investor Cathie Wood’s support. ARK Fintech Innovation Fund (ARKF) bought 500,000 shares in December 2021 and has increased its position to 3 million shares.

Both investors follow radically different investment strategies, but they both hold stocks for the long term. Buffett can hang on for decades while Cathie Wood’s ARK looks at an investment horizon of five years.

But while value investor Buffett wants strong balance sheets, innovation investor Wood wants disruption that transforms and changes life.

Fintech Bank to issue cryptocurrency

The digital bank is making progress with cryptocurrencies.

It first offered crypto trading in July 2021 and will release Nucoin, its own cryptocurrency, in 2023. Rio de Janeiro is likely to accept property taxes in crypto around the same time, giving Nubank an opportunity to tap into a potent market. It has already ventured into crypto trading for Bitcoin and Ethereum on the Nucripto trading platform.

Nucoin will operate on a blockchain with far-reaching implications, including decentralized apps. The fintech will run the coin on Polygon’s network, which uses the Ethereum blockchain and seeks to reduce transaction time and costs.

Nubank is the largest digital bank in Brazil by market value. Its fee-free credit card and digital banking services have been gaining customers since 2018, growing its base to over 65 million in the second quarter. This is approximately 35% of Brazil’s adult population.

Digital Finance gains traction during the crypto winter

Previously, JP Morgan Chase (JPM) became the first bank to offer its own stablecoin, launching JPMCoin.

Nucoin is not pegged to the US dollar, unlike JPMCoin. It will initially be a loyalty rewards program, but may become a tradable coin in the future.

MasterCard (MA) already offers CryptoSecure to help clients track crypto activity. Digital payment providers like PayPal (PYPL) and Robinhood also allow crypto payments.

Goldman Sachs (GS) was one of the first major Wall Street firms to offer a crypto derivatives trade for Bitcoin futures and non-deliverable forwards, under its Global Currencies and Emerging Markets.

In 2018, Buffett’s Berkshire bought an 8% stake in StoneCo, another Brazilian fintech. The 14 million shares that were bought during the IPO are still in the long-term investor’s portfolio.

StoneCo currently has a valuation of $8 billion and is one of the largest payment processors in Brazil.

In August, the LatAm fintech and e-commerce giant launched MercadoLibre (MELI) issued its own coin, now available for trading.

Nubank’s income

The NU shares have been beaten down this year, but the bank obtained a further 650 million dollars in line of credit in April. Revenue has grown to $1.2 billion – a 230% increase as it taps into the Latin American population of over 650 million. As of 30 June, the company had a strong cash position representing 79% of adjusted capital.

Nubank offers free digital banking services that counteract the exorbitant fees of traditional Brazilian banks. Nucoin and the Polygon platform should continue to support this new value story.

Fintech’s ultimate value lies in its disruption, attractive to investors looking to stay ahead of the digital asset curve.

Follow Vidya Ramakrishnan on Twitter @IBD_Vidya for updates on blockchain and cryptocurrencies, fintech, artificial intelligence and cloud technologies

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