Core Idea - The article emphasizes the investment philosophy of Thomas W. Phelps, particularly his book "100 to 1 in the Stock Market," which advocates for buying exceptional companies early, holding them with discipline, and allowing compounding to generate wealth [1][4][6]. Phelps's Investment Framework - Phelps's framework focuses on identifying companies with durable advantages, such as network effects, proprietary know-how, and advantageous cost structures [8]. - The importance of verifying a large addressable market that allows for long-term compounding without hitting a wall is highlighted [8]. - Present-tense profitability is essential; Phelps preferred companies that generate cash rather than speculative ventures [8]. - The article suggests buying companies when their narratives are still forming, favoring modest valuations over those priced for perfection [8]. - A strategy of doing less is recommended, as holding onto winning investments can lead to tax deferral and reduced errors [8]. Current Investment Candidates - The article lists 25 companies that fit Phelps's criteria, categorized by how they create competitive advantages rather than by index labels [9]. - Companies in the construction and infrastructure sector, such as EMCOR Group and Quanta Services, are noted for their execution capabilities and ability to convert backlog into cash [10][11]. - Precision manufacturers like Celestica and Fabrinet are recognized for their high returns on capital and asset-light models [12]. - In network infrastructure, Arista Networks and Super Micro Computer are highlighted for their strong positions in high-speed switching and AI hardware, respectively [13]. - Companies in the materials sector, such as Martin Marietta Materials, are noted for their pricing power and local monopolies [14]. - Engineering firms like WSP Global are recognized for their expertise and customer relationships in regulated markets [15]. - Consumer brands like e.l.f. Beauty and Academy Sports are mentioned for their market share growth and operational efficiency [16]. - Specialty finance companies like FirstCash and software firms like Agilysys are noted for their cash generation and growth potential [17]. - Internationally, utilities like Sabesp and fintechs like StoneCo are highlighted for their governance and profitability improvements [18]. - UK companies like Spectris and Halma are recognized for their consistent acquisition strategies and operational excellence [19]. Conclusion - The article concludes that the focus should be on finding real engines of growth and sizing investments appropriately to endure market volatility, allowing time to enhance value [22].

Company Overview - Nu Holdings Ltd. is a leading digital banking platform in Latin America, providing services such as credit cards, personal loans, and savings accounts, and is recognized for its innovative use of technology in banking [1] Financial Performance - Nu Holdings has a Return on Invested Capital (ROIC) of 5.51%, which is below its Weighted Average Cost of Capital (WACC) of 11.72%, resulting in a ROIC to WACC ratio of 0.47, indicating a need for improved operational efficiency [2][6] - StoneCo Ltd. demonstrates strong financial performance with a ROIC of 38.70% and a WACC of 11.08%, leading to a ROIC to WACC ratio of 3.49, showcasing effective capital utilization [3][6] - SoFi Technologies, Inc. has a ROIC of 4.93% against a higher WACC of 14.69%, resulting in a ROIC to WACC ratio of 0.34, suggesting potential long-term financial sustainability issues [4][6] - Grab Holdings Limited and Affirm Holdings, Inc. report negative ROIC figures, with GRAB at -0.11% and AFRM at -0.66%, indicating significant challenges in generating returns above their cost of capital [5][6]

Core Insights - StoneCo and UiPath are highlighted as affordable tech stocks under $20, both benefiting from positive earnings estimate revisions and strong industry rankings [1][11] Company Overview - StoneCo specializes in financial technology solutions for e-commerce in Brazil, while UiPath focuses on Robotic Process Automation for digital business operations [2] Sales Growth - StoneCo's annual sales surged from $644 million in 2020 to over $2.4 billion in the last year, with expectations of a 7% increase in fiscal 2025 and a further 5% rise in FY26 to $2.78 billion [3] - UiPath's sales are projected to grow by 10% in fiscal 2026 and by another 8% in FY27, reaching $1.7 billion [4] Earnings Estimates - StoneCo's EPS estimates for FY25 and FY26 have increased by over 7% in the last 60 days, indicating strong growth potential [8] - UiPath's EPS revisions for FY26 and FY27 have risen over 14% in the past two months, suggesting a potential rebound [9] Valuation and Market Position - Both companies are trading under 20X forward earnings, making them attractive investment opportunities despite not being classified as "cheap" [11]

Key Takeaways PayPal fuels growth with Venmo, BNPL, branded checkout and its new PayPal World wallet.StoneCo expands its ecosystem with payments, banking, credit and disciplined credit provisioning.Strong execution and underpenetrated markets position StoneCo for significant growth potential.The fintech industry remains highly competitive, with global leaders and regional challengers competing for market share. Two names that continue to stand out are PayPal (PYPL) and StoneCo (STNE) . PayPal, with more tha ...

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the "long context," investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Whil ...

Core Insights - StoneCo Ltd. experienced a significant decline in share price following disappointing results in 2020 and 2021 after a hike during the pandemic [1] - The company has shown a strong recovery over the past three years, delivering robust earnings and strong cash flow [1] Company Performance - StoneCo Ltd. faced challenges in 2020 and 2021, leading to a steep decline in share price [1] - The company has since recovered well, indicating a positive turnaround in its financial performance [1] Investment Perspective - The article reflects a focus on identifying undervalued stocks, particularly in the Latin American market, with an emphasis on long-term value [1]

Core Insights - StoneCo Ltd. reported quarterly earnings of $0.39 per share, exceeding the Zacks Consensus Estimate of $0.36 per share, and showing an increase from $0.30 per share a year ago, resulting in an earnings surprise of +8.33% [1] - The company achieved revenues of $672.06 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.91% and increasing from $615.13 million year-over-year [2] - StoneCo's stock has increased by approximately 68.3% since the beginning of the year, significantly outperforming the S&P 500's gain of 7.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.36, with expected revenues of $661.83 million, while the estimate for the current fiscal year is $1.49 on $2.65 billion in revenues [7] - The trend of estimate revisions for StoneCo has been favorable, contributing to a Zacks Rank 1 (Strong Buy) for the stock, indicating expectations of outperformance in the near future [6] Industry Context - The Internet - Software industry, to which StoneCo belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, highlighting the importance of monitoring these revisions for investment decisions [5]

Financial Data and Key Metrics Changes - The adjusted net income increased by 27% year over year, reaching BRL631 million, primarily driven by financial services operations which grew by 21% [14][15] - Adjusted basic EPS rose to BRL2.33 per share, representing a 45% year over year increase, bolstered by share repurchases [15] - ROE for financial services segment reached 30%, while consolidated ROE was 22%, both showing significant year-over-year growth [15][16] - Revenues from continuing operations grew 20% year over year to BRL3.5 billion, driven by repricing initiatives [16] Business Line Data and Key Metrics Changes - Financial services operations were the main contributor to growth, with a 21% increase in revenue [14] - Payments active client base grew 17% year over year to 4.5 million clients, with TPV for MSNBs growing 12% year over year to BRL122 billion [19] - Banking client base increased by 23% year over year, reaching 3.3 million clients, with deposits growing 36% year over year [21] - Credit portfolio grew 25% sequentially to BRL1.8 billion, with working capital disbursements increasing by 41% quarter over quarter [23] Market Data and Key Metrics Changes - The company noted a deceleration in TPV growth due to macroeconomic challenges and a reduction in clients' same-store sales [20] - The anticipated TPV growth for the second half of the year is expected to stabilize at low double digits [20] Company Strategy and Development Direction - The company is focusing on financial services, targeting over 90% of the total addressable market, while software is now viewed as a value-added layer [5][6] - Recent divestitures, including the sale of Lynx and SimpliVet, are aimed at reallocating capital towards higher growth segments [6][7] - The company plans to return excess capital to shareholders if no immediate growth opportunities are identified [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a challenging macroeconomic environment while maintaining growth [14][25] - The company is monitoring TPV dynamics closely, acknowledging risks to 2027 guidance due to softer overall market growth [36] Other Important Information - The company has shifted its reporting to focus on continuing operations, with discontinued operations presented separately [10][26] - The effective tax rate decreased to 15% from 22.5% year over year, contributing to improved net income performance [29] Q&A Session All Questions and Answers Question: How comfortable is the company with delivering the 2027 guidance given the slower growth environment? - Management acknowledged the softer market growth but emphasized confidence in long-term guidance, stating that TPV growth is one dimension of a broader strategy [36] Question: What is the plan for the capital from the Lynx sale? - The company plans to return capital to shareholders in the absence of new growth opportunities, with specifics to be provided upon closing the transaction [39][40] Question: Is the financial income growth sustainable? - Management indicated that gross profit generation is driven by effective tax rates and operational leverage, suggesting sustainability in financial income growth [70] Question: What is the expected cost of risk moving forward? - The company expects the cost of risk to return to mid-teens levels, closer to 13.5%, after a one-time increase to 20% [81][98] Question: How does the company view the competitive environment and pricing strategy? - Management sees a rational competitive environment and does not expect significant changes in pricing strategy, even with potential interest rate cuts in the future [105][106]

Strategic Divestments - StoneCo divested Linx and related assets to TOTVS for an enterprise value of R$305 billion and a total value of R$341 billion[12] - SimplesVet was divested to PetLove for an enterprise value of R$140 million and a total value of R$155 million[12] - The value captured from divestments represents approximately 25% of StoneCo's market capitalization, while the divested assets accounted for less than 5% of the company's adjusted net income[11, 14] Financial Performance (2Q25) - StoneCo's adjusted basic EPS for continuing operations increased by 409% year-over-year[20, 45] - Adjusted net income from continuing operations increased by 237% year-over-year to R$5981 million[20, 39] - Total revenue and income from continuing operations grew by 202% year-over-year to R$35009 million[34, 39] - Adjusted gross profit from continuing operations increased by 139% year-over-year to R$15615 million[39] Business Segments - MSMB (Micro, Small, and Medium Businesses) payments client base increased by 64% year-over-year[26] - MSMB TPV (Total Payment Volume) increased by 12% year-over-year[26] - Retail deposits increased by 36% year-over-year[28] - Credit portfolio increased by 25% quarter-over-quarter[30] Guidance Update - StoneCo updated its 2025 adjusted gross profit guidance to > R$6375 billion, reflecting a 145% year-over-year increase[17] - The company updated its 2025 adjusted basic EPS guidance to > R$96 per share, representing a 32% year-over-year increase[17] Future Outlook (2027 Guidance) - StoneCo projects MSMB TPV to exceed R$670 billion by 2027, with a CAGR of +14%[46] - The company anticipates retail deposits to surpass R$140 billion by 2027, with a CAGR of +17%[46] - StoneCo expects its credit portfolio to exceed R$55 billion by 2027, with a CAGR of +66%[46] - The company forecasts adjusted gross profit to exceed R$102 billion by 2027, with a CAGR of +18%[46] - StoneCo projects adjusted basic EPS to exceed R$150 per share by 2027, with a CAGR of +27%[46]

Core Viewpoint - StoneCo Ltd. reported its financial results for the second quarter ended June 30, 2025, highlighting its performance in the financial technology sector [1]. Financial Results - The financial results for Q2 2025 were released on August 7, 2025, and are available on the company's Investor Relations website [1]. - A teleconference to discuss these results was scheduled for the same day at 5:00 PM ET / 6:00 PM BRT [2]. Company Overview - StoneCo is recognized as a leading provider of financial technology solutions, enabling merchants to conduct commerce seamlessly across various channels [4]. - The company offers a range of services including payments, banking, credit, and software solutions to help businesses grow [4].