Warren Buffett Just Sold Nu Stock. Here's Why You Probably Shouldn't.

Core Viewpoint - Warren Buffett has been a net seller of stocks, increasing Berkshire Hathaway's cash reserves, while still maintaining a significant position in Apple and a small stake in Nu Holdings, indicating a cautious but ongoing interest in the latter [1][2]. Company Overview - Nu Holdings is an all-digital bank based in Brazil, aiming to disrupt a highly regulated banking system dominated by a few large banks [4]. - The company offers low-fee, user-friendly products that have attracted a diverse customer base, including higher-income individuals seeking better banking experiences [5]. Customer Growth and Engagement - Nu has captured over half of Brazil's adult population as customers, adding more than one million new customers monthly, with an impressive 84% engagement rate among its members [6]. - The company has expanded into Mexico and Colombia, showing rapid growth potential in these markets [6]. Financial Performance - Nu reported a 56% year-over-year revenue increase in Q3 2024, with net income rising by 83%, demonstrating strong profitability despite challenges in newer regions [7]. - The Brazilian business is currently the only segment reporting net income, which supports growth in other regions [7]. Market Sentiment and Stock Performance - Nu's stock increased by 24% in 2024, but faced volatility due to Buffett's small sale of shares and concerns over Brazil's economic conditions, including high inflation [8]. - The average revenue per active user (ARPAC) fell slightly from $11.20 to $11, although it increased by 2% on a currency-neutral basis [9]. Strategic Developments - Management announced plans to invest in a digital bank operating in South Africa and the Philippines, which was met with negative market sentiment [10]. - Despite the challenges posed by the Brazilian economy, Nu is effectively managing its operations and building a robust credit business [12]. Investment Considerations - The current lower stock price may present a buying opportunity for investors with a risk appetite and a long-term investment horizon, especially given Buffett's continued majority stake in Nu [12].