Warren Buffett is probably the most famous and successful investor living today. That's why people carefully follow and analyze every move he makes and every nugget of wisdom he offers.
His holding company, Berkshire Hathaway, owns about 45 stocks. The mix leans heavily toward value stocks, and in particular, financial stocks. One of the newer and more surprising stocks in the portfolio is Brazilian fintech Nu Holdings(NYSE: NU). On the other end of the spectrum, you have Buffett favorite American Express(NYSE: AXP), one of his longest-held stocks. Which one is the better buy today?
This fast-growing fintech could deliver explosive gains
Keith Noonan: Coming in at just 0.6% of the investment giant's stock holdings, Nu Holdings isn't a major position for Berkshire Hathaway. But for risk-tolerant investors looking for exposure to growth in international markets, I think the Brazilian fintech player has the potential to be one of the most explosive stocks Buffett's company owns.
Nu provides banking, credit, and other financial services in Brazil, Mexico, and Colombia, and it looks poised to continue scoring wins in these markets. It also has the opportunity to expand in other Latin American markets, and there's a good chance that it will be able to leverage its existing strengths to broaden its business on new fronts. Crucially, the company is already serving up great results.
With its recently published third-quarter results, Nu posted revenue of $2.94 billion -- up 37% year over year. The performance came in significantly better than the average analyst estimate, as polled by FactSet, which had called for revenue of $2.6 billion. Meanwhile, the company's earnings per share (EPS) came in at $0.11 -- up roughly 81% compared to the prior-year period.
Nu managed to add 5.2 million customers in the quarter, bringing its total global customer count to 109.7 million. On an annual basis, the company's client base was up 23% in the period. The company also saw an increase in average revenue per active customer (ARPAC). It closed out the period with ARPAC of $11, representing a 2% sequential quarterly increase and 25% year-over-year growth on a currency-adjusted basis.
While investing in Brazil and other Latin American markets can come with some extra macroeconomic risk factors compared to the U.S., Nu has a strong balance sheet that should help it ride out volatility and continue investing in expansion. The company is already solidly profitable, and it closed Q3 with roughly $2.4 billion in cash.
If you're on the hunt for potentially explosive growth stocks in the Berkshire Hathaway portfolio, I think Nu stands out as a top candidate right now.
The classic Buffett value stock
Jennifer Saibil: Buffett has owned American Express stock since 1995, making it the second-longest holding after Coca-Cola(NYSE: KO), another of his favorite stock. He sings the company's praises as having a competitive moat in its global brand, and he loves the reliable and growing dividend. He explained last year that the dividends for Berkshire from American Express alone were $302 million in 2022.
However, there are many other things to love about American Express that fit the classic Buffett schema. It has a fee-based model that creates a steady revenue stream, and the fees go straight to the bottom line, leading to robust net income. After Berkshire Hathaway's recent selling spree, which included shares of Apple and Bank of America, American Express has shifted into the No. 2 spot in the Berkshire equity portfolio at 14.8% of the total.
American Express targets an affluent clientele that generally spends more money than the average consumer. Consider that it only has about 150 million card members, in contrast with credit card giant Visa's 4.5 billion cards, but it makes much more revenue -- $64 billion in trailing 12-month sales, versus Visa's $36 billion.
American Express has developed a complete financial services business beyond credit cards that includes a bank and small business solutions. The banking segment keeps the company flush with cash to finance its activities and add to profit with net interest income. These are features Buffett loves in a stock.
It continued strong trends in the third quarter, with an 8% revenue increase over last year and 6% increase in earning per share. It issued 3.3 million new cards, and fee income was up 18% over last year.
The resilient, well-heeled customer is American Express' bread and butter, and it constantly refreshes and develops credit cards to meet this clientele's high expectations. It has successfully managed to capture a younger cohort of this demographic, positioning it for years of growth.
Reliable growth and profit, an enduring moat, and an increasing dividend make American Express a top value stock for long-term investors.
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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express and Nu Holdings. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Visa. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
