finbold.com
Although Warren Buffett has maintained a hostile stance towards cryptocurrencies, particularly Bitcoin (BTC), his investment company, Berkshire Hathaway (NYSE: BRK.A), still has some indirect exposure to the sector, with bets notching some profits.
His pessimistic stand comes as Bitcoin trades at record highs and is now under consideration for inclusion in the United States Strategic Reserve. Buffett has maintained that he sees a bad ending for the asset, famously referring to it as ‘rat poison.’
When looking at his indirect crypto exposure, Buffett, through Berkshire Hathaway, has a stake in Brazilian fintech company Nu Holdings (NYSE: NU). Nu Holdings enables users to send and receive cryptocurrencies directly from their wallets, supporting Bitcoin, Ethereum (ETH), and Solana (SOL).
The stock closed the last trading session valued at $11.78, having rallied about 44% year-to-date. At the start of 2024, NU was valued at $8.09.
Buffett’s returns on NU stock
Looking at Buffett’s holding, Berkshire Hathaway initially owned 107.1 million shares, but it has reduced its stake to around 86.4 million shares, a nearly 20% reduction in its position, according to the latest filing.
At the start of 2024, with Nu Holdings trading at $8.09 per share, Berkshire Hathaway’s stake was valued at approximately $866.6 million.
Now, based on the current value of $11.76 per share, the 86.4 million shares are worth about $1.016 billion. This means Buffett’s profits on his remaining 86.4 million shares have increased by nearly $149.4 million, a 17.3% gain from the original investment value.
However, had Berkshire Hathaway held all 107.1 million shares, the gains would have been even more substantial. At the current share price of $11.76, Buffett’s total position would be worth around $1.26 billion, yielding a profit of about $395 million on those 107.1 million shares.
NU stock price fundamentals
It’s worth noting that Nu Holdings has rallied, with the stock being supported by strong fundamentals, such as solid financial performance.
For the third quarter, the challenger bank’s revenue hit $2.9 billion for the three months ending in September, a 58% increase on a foreign-exchange neutral basis or a 38% gain in U.S. dollars. Adjusted income soared 67% to $592 million.
However, things have not been entirely rosy for Nu. The entity’s average revenue per active customer declined, and the net interest margin dropped slightly, both sequentially and year over year.
On the other hand, the company has also faced several headwinds, specifically growing competition from other fintech firms aiming to capture the Brazilian market. At the same time, traditional banks, such as Itaú, are also looking to capture a share of the digital assets market, recently offering crypto transaction services.
Additionally, the firm has been affected by Brazil-specific concerns, such as inflationary pressures and recent interest rate hikes, which contrast with actions taken by the Federal Reserve.
Finally, Nu Holdings is looking for further expansion, with Mexico remaining a key area of focus. Nu is seeking to replicate its success in Brazil, as the Mexican market has the potential for rapid customer acquisition due to low banking penetration. However, adapting to local regulations remains a challenge.
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