We recently compiled a list of 10 Best Stocks Under $15 To Buy Now. In this article, we will look at where Nu Holdings Ltd. (NYSE:NU) ranks among the best stocks under $15.
While September is usually the toughest month for the stock market, it is delivering solid results this time. Stocks are soaring after the Federal Reserve announced a half-point cut this month to bring interest rates between 4.75% and 5%. This has led to the market racking up records again as investors look to move from riskier investments to stocks, reported CNN.
The broader market marked its 42nd record-high close in 2024 this past Thursday. The index, which has a history of September dips, is on track for a 1.3% gain this month, which will take its quarterly advance close to 5%. The Dow Jones Industrial Average surged 0.4% a day later to reach its 32nd record high for the year after investors received encouraging economic data regarding inflation, which has raised hopes for further interest rate cuts.
According to the Personal Consumption Expenditures Price Index, inflation rose 2.2% in August this year, which marked the lowest inflation rate in the United States since February 2021. Overall inflation in the country is crawling back to the Federal Reserve’s goal of a two percent annual rate. The easing of consumer prices is expected to result in further interest rate cuts to prevent a spike in unemployment rates, say economic experts. This has raised hopes among investors about the American economy returning to solid footing.
However, Fundstrat Global Advisors’ co-founder, Tom Lee, in an interview with CNBC this week cautioned against diving into stocks after interest rate cuts, citing election uncertainty.
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
In the weeks leading to the cuts, Lee, who is generally bullish on the stock market, warned investors that stocks could fall 10% during the coming eight weeks amid nervousness around the presidential elections, and added that the dip should viewed as a buying opportunity.
Liz Young Thomas, the head of investment strategy at SoFi, has also acknowledged the risk of stock market volatility associated with the presidential elections. While talking to the Business Insider, she noted how thinner trading volumes between June and August, when traders are on summer vacations, drive strong market performance, and the market turns volatile when stock activity picks up after traders return to their desks in September. According to Young Thomas, a two percent shift in share prices has become the norm in September. However, during the election year, volatility peaks around mid-October instead of September, and the market returns to normalcy after the results are announced.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks with a share price of under $15 and then picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. In the case where two or more stocks had the same number of hedge fund holders, we used market capitalization as a tie-breaker and placed the stock having a greater market capitalization at a higher ranking.
Why are we interested in 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)
Number of Hedge Fund Holders: 59
Share Price as of the close of September 27: $13.87
Nu Holdings Ltd. (NYSE:NU) is a Brazil-based digital banking company that provides financial services in multiple countries of Latin America. It is also one of the best-performing Warren Buffet stocks in 2024. The company’s share price has surged 103% over the past year, driven primarily by consistent growth in its net income over the last six quarters.
The company reported strong results during the second quarter of 2024, generating a revenue of $2.8 billion, representing a 65% increase from last year. Gross profit for the quarter climbed to $1.4 billion, up 88% from last year, while net income reached $487 million, resulting in a record-high annualized return of equity of 28%, and an EPS of $0.12 which beat analysts’ expectations of $0.10 per share.
These strong results were mainly attributed to two factors. The first is customer growth. The total number of Nu Holdings Ltd. (NYSE:NU) customers reached 105 million during the quarter, up from 65 million two years ago. This was fueled by extraordinary growth in Brazil, where an average of 1.2 million new customers are added every month.
Secondly, the active user base also expanded 27% year-over-year. This was the 11th successive quarter during which the metric showed improvement. Products and services launched for users are also being well-received. As of Q2, there were an average of 4.1 products per active customer. Average revenue per active customer also increased 6% sequentially during the quarter to reach $11.2.
Despite the strong show in Q2, the company admitted that its market shares in credit cards and loans are on the lower side. For instance, around one-third of the population in Brazil have NuBank as their primary bank account, but only 13-14% use NuBank’s credit cards. The proportion is even lower – in single digits – when it comes to loans, noted Youssef Lahrech, President and CEO, in the Q2 Earnings Call.
However, that is one minor area of concern for the company, and its overall outlook looks promising. There is consensus among Wall Street analysts on the stock’s Buy rating. Investors also remain bullish on the stock. Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
Nu Holdings Ltd. (NYSE:NU) 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.
According to Insider Monkey’s database, 59 hedge funds had a stake in the company as of Q2 2024, making it one of the best stocks under $15 to buy now.
Overall NU ranks 2nd on our list of the best stocks under $15. 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 but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published on Insider Monkey.