We recently compiled a list of the 9 Stocks Warren Buffett Has Bought Since Beginning of AI Revolution. In this article we are going to take a look at where Nu Holdings Ltd. (NYSE:NU) stands against Buffet’s other stock picks since the beginning of AI revolution.
Artificial intelligence has been the buzzword on Wall Street for the past several months, with investors tripping over themselves to get a piece of the pie as the new technology sweeps the business world. AI-powered trading systems now account for over 60% of total equity trading volume in the United States. Investors have been turning to AI for enhanced efficiency and faster decision-making speeds. These AI-based investing algorithms can analyze vast datasets and predict stock price movements with up to 80% accuracy. The potential of AI-driven investment funds can be understood better by comparing their performance against traditional peers, with the former outperforming the latter by 1-3% annually.
However, if there is one person who seems least bothered by this hullabaloo, it is Warren Buffett, an American business tycoon, entrepreneur, and investor presently serving as the chief of Berkshire Hathaway, one of the biggest hedge funds in the world. When Buffett speaks, the world listens. At the annual shareholder meeting of his organization in early May, Buffett tackled the subject of artificial intelligence, reinforcing cliches about his mistrust towards technology stocks but stopping short of denouncing it altogether. However, the Oracle of Omaha, as he is affectionately known, did compare the rise of AI to the invention of the nuclear weapons, describing both technologies as genies that could not be returned to the bottle.
Buffett, whose personal net worth is over $136 billion, manages a 13F portfolio at his hedge fund that was worth more than $331 billion at the end of the first quarter of 2024. In contrast to most other money managers on Wall Street, the strength of his portfolio is derived from value offerings that he has held onto for years and even decades, as opposed to the day trading habits of some of his more aggressive peers in the hedge fund universe. This investing acumen has earned Buffett a legendary status in the finance world and is partly the reason why tens of thousands of people lined up the streets of Omaha in May to listen to him speak about AI and whether he would be investing in the new technology.
In response to a question about AI, Buffett noted that even though he did not fully understand the new technology, he was wise enough to gather, from what he had seen already, that it held enormous potential. He clarified, however, that he did not yet know whether this potential would do more good than harm. Perhaps the most interesting statement from the investing guru at the annual shareholder meeting, and one that illustrates the difference between him and other money managers, was about the impact that AI would have on ordinary people and their ordinary workplaces. According to Buffett, AI could create more leisure time for people, but he was more interested in how they would spend that time than in how AI would bring that about.
“It can create an enormous amount of leisure time. Now what the world does with leisure time is another question. I know an awful lot of people think when they go to work at first what they want is leisure time – and what I like is actually having more problems to solve.”
Our Methodology
For this article, we scanned the stock portfolio of Berkshire Hathaway according to the 13F filings submitted at the end of the first quarter of 2024. We compared his Q1 2024 13F portfolio to his Q3 2022 13F portfolio, selecting the companies with the biggest percentage change in number of shares. The companies that feature in the Q1 2024 13F portfolio but did not feature in the Q3 2022 13F portfolio have also been included. 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).
A wide angle shot of a team of bankers and financial advisors evaluating an investment portfolio on a touchscreen monitor.
Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 63
Berkshire Hathaway’s Shares in Q1 2024: 107,118,784
Nu Holdings Ltd. (NYSE:NU) owns and runs a digital banking platform in Brazil, Mexico, Colombia, Cayman Islands, Germany, Argentina, the United States, and Uruguay. The stock has been performing on several metrics over the past few months. The user base of the firm continues to expand, reaching 100 million customers at the end of the first quarter of 2024. Revenue is also improving, growing a whopping 66% year-over-year in the first three months of the year. The net income during this period was in excess of $440 million, comfortably beating analyst expectations across Wall Street.
Buffett typically invests in firms that have handsome margins. Nu Holdings Ltd. (NYSE:NU) is no exception. The first quarter results of the firm show that it has managed to increase the average monthly revenue per active user by 30% year-on-year, while maintaining the average monthly customer service costs below $1. The company has lots of room to grow as it is still only the fourth largest financial institution in Latin America. Nu Holdings Ltd. (NYSE:NU) is also a smart AI play by Buffett, as the company recently acquired Hyperplane, a Silicon Valley-based data intelligence company, to enhance artificial intelligence capabilities.
In its Q1 2024 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Nu Holdings Ltd. (NYSE:NU) was one of them. Here is what the fund said:
“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. “
Overall NU ranks 1st on our list of the best stocks Warren Buffett has bought since beginning of AI revolution. 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 AI stock that is more promising than NU but that trades at less than 5 times its earnings, checkout our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.