Berkshire Hathaway is the latest entry into the $1 trillion market cap club. Let’s look at a couple of its more interesting stock holdings.
Warren Buffett is undeniably this generation’s greatest investor, and hitting a major milestone on Wednesday cements that status. The good thing for investors like us is that we know the dozens of stocks that make up the stock portfolio of his iconic holding company. Let’s go over some of the ones I’m eyeing these days.
Nu Holdings (NU 0.17%) and Sirius XM (SIRI 1.20%) are among the current holdings of Buffett’s Berkshire Hathaway (BRK.A 0.72%) (BRK.B 0.69%) stock portfolio. Berkshire Hathaway topped $1 trillion in market cap this week, the first non-technology U.S. company to hit that major mark. Nu and Sirius XM seem to be no-brainer buys right now. Each one deserves a closer look.
1. Nu Holdings
Buffett was willing to try something Nu when the parent company of Latin America’s Nubank went public at $9 in late 2021. Berkshire Hathaway is no stranger to financial services providers, but Brazil-based Nu Holdings is a digital branchless banking specialist. It was the right call. Nu has risen nearly 60% since its initial public offering (IPO). It’s not a monstrous return, but it’s a lot better than the two leading U.S. fintech stocks that surrendered more than half their value in that time.
Nubank has come a long way in a short time. It launched just 10 years ago in its home country, but 56% of Brazil’s adult population already has an account with the rising fintech star. It expanded into Mexico and Colombia a couple of years ago, and it’s understandably a lot earlier in its growth cycle in those two markets.
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Revenue rose 65% to $2.8 billion on a foreign-exchange-neutral basis in its latest quarter, Nu’s headiest year-over-year growth in more than a year, and the company topped 100 million accounts during the quarter. Its customer base of 104.5 million at the end of June is up just 25% over the past year, but engagement and the monetization of its growing audience continue to improve.
Average monthly revenue per user has risen 30% to $11.20 over the past year. It’s a big jump for a company where it costs less than $1 a month on average — just $0.90 — to service an account. It spends just $7 to acquire a new account, so a customer is already profitable near the end of the first month. It’s no surprise that Nu itself is highly profitable. Its adjusted net income soared 131% to $562.5 million in its latest quarter, a record net margin of 20% for the company.
The stock isn’t cheap. It currently commands a market cap greater than Brazil’s largest traditional bank. However, as it broadens its reach and product line, it may be as hard to bet against Nu as it is to bet against Buffett.
2. Sirius XM
Sirius XM is at the other end of the growth and valuation spectrum. The only game in town when it comes to satellite radio is going the wrong way when it comes to growth. Revenue growth turned slightly negative in 2023, and after peaking last year, its subscriber count is starting to contract.
It’s a new world. Connected cars provide seamless access to streamed audio content from smartphones, making it less necessary to pay a premium for coast-to-coast live programming. However, Sirius XM is very profitable, consistently generating more than $1 billion in free cash flow a year. It still serves 33 million subscribers.
The stock is also cheap. It trades for less than 10 times trailing earnings with a dividend yield of 3.3%. The conversion of tracking shares into common stock in two weeks should also provide a simplified corporate structure. Buffett doesn’t need a stock to be simple, but it could help the market’s perception of Sirius XM as an investment.
Rick Munarriz has positions in Nu Holdings. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
