Cathie Wood bounced back in 2023 after back-to-back years of disappointment. The CEO and co-founder of Ark Invest is trying to keep her winning streak going as an aggressive growth-stock investor this year. She’s been adding to some of her existing positions in 2024, including a few notable purchases on Monday.
Wood kicked off the new trading week by adding to her stakes in Nu (NYSE: NU), MercadoLibre (NASDAQ: MELI), and Toast (NYSE: TOST). Let’s see what she might be seeing in these promising growth stocks.
Nu
Nubank may not be a household name to stateside investors, but it’s a fintech juggernaut in Brazil. Its parent company Nu reached an important milestone in its latest quarter, with 84 million of its 89.1 million accounts based in its home country.
More than half of Brazil’s adult population now has a Nu account. The stunning kicker here is that Nu has done this in less than 10 years.
Revenue soared 53% in its latest quarter, adjusted for foreign-exchange fluctuations. Growing its customer base by 27% explains a good chunk of that growth, but improving engagement is why Nu’s top line is growing substantially better than that.
With activity rate at record levels, Nu’s average revenue per active customer has risen 18% over the past year. It’s not surprising that Nu stock more than doubled in 2023.
With 51% of Brazil’s adult population leaning on Nu’s growing suite of next-gen financial services, this isn’t just about gaining market share in its home country. It rolled out in Mexico and Colombia in 2020. Brazil still accounts for 94% of its customer base, but expanding across Latin America — if successful — has a long runway for growth.
Many fintech stocks would be losing money at this early stage of their growth, but Nu just posted record profitability in its latest quarter. It has scored five consecutive quarters of positive income. The stock may not seem cheap at 22 times this new year’s projected adjusted earnings, but that multiple drops to a more reasonable 15 if looking out to next year.
MercadoLibre
Nu isn’t the only South American stock that Wood was buying earlier this week. Ark Invest also added to Latin America’s top dog in e-commerce.
MercadoLibre also posted strong growth in its latest financial update. Revenue soared 69% to $3.8 billion on a foreign-exchange-neutral basis in the third quarter. A 59% surge in gross merchandise volume on its e-commerce platform turned heads, but it wasn’t the most impressive driver in the report.
MercadoPago is the company’s fintech solution, and the $47.3 billion in total payment volume is up a scorching 121% over the past year. There were 120 million unique active users in the widening MercadoLibre ecosystem in its latest quarter, up from 88 million a year earlier.
Investors are paying attention. The stock soared 86% last year after back-to-back years of double-digit declines.
Toast
Closer to home, Toast wasn’t as successful for investors in 2023. Unlike the monster stock charts that Nu and MercadoLibre delivered last year, Toast trailed the market badly with its pedestrian 1% gain.
Like Nu and MercadoLibre, there’s a fintech play in the Toast toolbox. It provides restaurants with an easy way to let customers pay for their meals. Toast also offers eateries a growing array of solutions to tackle other business operations, but it’s the point-of-sale system that gets the company’s readers into the door.
Business is growing. The 99,000 locations on the platform is a 34% increase over the past year. The stock still slipped after its latest report when Toast warned investors that gross payment volume per location was trending lower in the fourth quarter.
Toast is naturally at the mercy of the state of the economy, in general, and dining-out trends, in particular. However, there’s no reason to think that a recent slowdown in patron activity is indicative of what’s on the menu for Toast in 2024.
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Rick Munarriz has positions in Nu and Toast. The Motley Fool has positions in and recommends MercadoLibre and Toast. The Motley Fool recommends Nu. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
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